AON PLC, 10-K filed on 2/24/2012
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2011
Jan. 31, 2012
Jun. 30, 2011
Document and Entity Information
 
 
 
Entity Registrant Name
AON CORP 
 
 
Entity Central Index Key
0000315293 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 16,759,298,779 
Entity Common Stock, Shares Outstanding
 
325,179,163 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
FY 
 
 
Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Revenue
 
 
 
Commissions, fees and other
$ 11,235 
$ 8,457 
$ 7,521 
Fiduciary investment income
52 
55 
74 
Total revenue
11,287 
8,512 
7,595 
Expenses
 
 
 
Compensation and benefits
6,567 
5,097 
4,597 
Other general expenses
3,114 
2,189 
1,977 
Total operating expenses
9,681 
7,286 
6,574 
Operating income
1,606 
1,226 
1,021 
Interest income
18 
15 
16 
Interest expense
(245)
(182)
(122)
Other income
 
34 
Income from continuing operations before income taxes
1,384 
1,059 
949 
Income taxes
378 
300 
268 
Income from continuing operations
1,006 
759 
681 
Income (loss) from discontinued operations before income taxes
(39)
83 
Income taxes (benefit)
(12)
(28)
Income (loss) from discontinued operations
(27)
111 
Net income
1,010 
732 
792 
Less: Net income attributable to noncontrolling interests
31 
26 
45 
Net income attributable to Aon stockholders
979 
706 
747 
Net income attributable to Aon stockholders
 
 
 
Income from continuing operations
975 
733 
636 
Income (loss) from discontinued operations
(27)
111 
Net income
$ 979 
$ 706 
$ 747 
Basic net income (loss) per share attributable to Aon stockholders
 
 
 
Continuing operations (in dollars per share)
$ 2.91 
$ 2.50 
$ 2.25 
Discontinued operations (in dollars per share)
$ 0.01 
$ (0.09)
$ 0.39 
Net income (in dollars per share)
$ 2.92 
$ 2.41 
$ 2.64 
Diluted net income (loss) per share attributable to Aon stockholders
 
 
 
Continuing operations (in dollars per share)
$ 2.86 
$ 2.46 
$ 2.19 
Discontinued operations (in dollars per share)
$ 0.01 
$ (0.09)
$ 0.38 
Net income (in dollars per share)
$ 2.87 
$ 2.37 
$ 2.57 
Cash dividends per share paid on common stock (in dollars per share)
$ 0.60 
$ 0.60 
$ 0.60 
Weighted average common shares outstanding - basic (in shares)
335.5 
293.4 
283.2 
Weighted average common shares outstanding - diluted (in shares)
340.9 
298.1 
291.1 
Consolidated Statements of Financial Position (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 272 
$ 346 
Short-term investments
785 
785 
Receivables, net
3,183 
2,701 
Fiduciary assets
10,838 
10,063 
Other current assets
427 
624 
Total Current Assets
15,505 
14,519 
Goodwill
8,770 
8,647 
Intangible assets, net
3,276 
3,611 
Fixed assets, net
783 
781 
Investments
239 
312 
Deferred tax assets
258 
305 
Other non-current assets
721 
807 
TOTAL ASSETS
29,552 
28,982 
CURRENT LIABILITIES
 
 
Fiduciary liabilities
10,838 
10,063 
Short-term debt and current portion of long-term debt
337 
492 
Accounts payable and accrued liabilities
1,832 
1,810 
Other current liabilities
753 
584 
Total Current Liabilities
13,760 
12,949 
Long-term debt
4,155 
4,014 
Deferred tax liabilities
301 
663 
Pension, other post retirement and post employment liabilities
2,192 
1,896 
Other non-current liabilities
1,024 
1,154 
TOTAL LIABILITIES
21,432 
20,676 
EQUITY
 
 
Common stock - $1 par value Authorized: 750 shares (issued: 2011 - 386.4; 2010 - 385.9)
386 
386 
Additional paid-in capital
4,021 
4,000 
Retained earnings
8,594 
7,861 
Treasury stock at cost (shares: 2011 - 61.6; 2010 - 53.6)
(2,553)
(2,079)
Accumulated other comprehensive loss
(2,370)
(1,917)
TOTAL AON STOCKHOLDERS' EQUITY
8,078 
8,251 
Noncontrolling interests
42 
55 
TOTAL EQUITY
8,120 
8,306 
TOTAL LIABILITIES AND EQUITY
$ 29,552 
$ 28,982 
Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Consolidated Statements of Financial Position
 
 
Common stock, par value (in dollars per share)
$ 1 
$ 1 
Common stock, Authorized shares
750 
750 
Common stock, issued shares
386.4 
385.9 
Treasury stock, shares
61.6 
53.6 
Consolidated Statements of Stockholders' Equity (USD $)
In Millions, except Share data, unless otherwise specified
Total
Common Stock and Additional Paid-in Capital
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Loss, Net of Tax
Noncontrolling Interests
Comprehensive Income
Balance at Dec. 31, 2008
$ 5,415 
$ 3,582 
$ 6,816 
$ (3,626)
$ (1,462)
$ 105 
 
Balance (in shares) at Dec. 31, 2008
 
361,700,000 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
Net income
792 
 
747 
 
 
45 
792 
Shares issued - employee benefit plans
119 
119 
 
 
 
 
 
Shares issued - employee benefit plans (in shares)
1,000,000 
1,000,000 
 
 
 
 
 
Shares purchased
(590)
 
 
(590)
 
 
 
Shares reissued - employee benefit plans
(63)
(357)
(63)
357 
 
 
 
Tax benefit - employee benefit plans
25 
25 
 
 
 
 
 
Stock compensation expense
209 
209 
 
 
 
 
 
Dividends to stockholders
(165)
 
(165)
 
 
 
 
Change in net derivative gains/losses
13 
 
 
 
13 
 
13 
Change in net unrealized investment gains/losses
(12)
 
 
 
(12)
 
(12)
Net foreign currency translation adjustments
203 
 
 
 
199 
203 
Net post-retirement benefit obligation
(413)
 
 
 
(413)
 
(413)
Purchase of subsidiary shares from noncontrolling interests
(3)
 
 
 
 
(3)
 
Capital contribution by noncontrolling interests
35 
 
 
 
 
35 
 
Deconsolidation of noncontrolling interests
(102)
 
 
 
 
(102)
 
Dividends paid to noncontrolling interests on subsidiary common stock
(32)
 
 
 
 
(32)
 
Comprehensive income
 
 
 
 
 
 
583 
Balance at Dec. 31, 2009 (Balance Before Adoption of New Accounting Guidance)
 
 
7,335 
 
(1,675)
 
 
Balance (Adjustment for Adoption of New Accounting Guidance)
 
 
44 
 
(44)
 
 
Balance at Dec. 31, 2009
5,431 
3,578 
7,379 
(3,859)
(1,719)
52 
 
Balance (in shares) at Dec. 31, 2009
 
362,700,000 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
Net income
732 
 
706 
 
 
26 
732 
Shares issued - Hewitt acquisition
2,474 
2,474 
 
 
 
 
 
Shares issued - Hewitt acquisition (in shares)
 
61,000,000 
 
 
 
 
 
Shares issued - employee benefit plans
135 
135 
 
 
 
 
 
Shares issued - employee benefit plans (in shares)
2,200,000 
2,200,000 
 
 
 
 
 
Shares purchased
(250)
 
 
(250)
 
 
 
Shares reissued - employee benefit plans
(49)
(370)
(49)
370 
 
 
 
Shares retired
 
(1,660)
 
1,660 
 
 
 
Shares retired (in shares)
 
(40,000,000)
 
 
 
 
 
Tax benefit - employee benefit plans
20 
20 
 
 
 
 
 
Stock compensation expense
221 
221 
 
 
 
 
 
Dividends to stockholders
(175)
 
(175)
 
 
 
 
Change in net derivative gains/losses
(24)
 
 
 
(24)
 
(24)
Net foreign currency translation adjustments
(135)
 
 
 
(133)
(2)
(135)
Net post-retirement benefit obligation
(41)
 
 
 
(41)
 
(41)
Purchase of subsidiary shares from noncontrolling interests
(15)
(12)
 
 
 
(3)
 
Capital contribution by noncontrolling interests
 
 
 
 
 
Dividends paid to noncontrolling interests on subsidiary common stock
(20)
 
 
 
 
(20)
 
Comprehensive income
 
 
 
 
 
 
532 
Balance at Dec. 31, 2010
8,306 
4,386 
7,861 
(2,079)
(1,917)
55 
 
Balance (in shares) at Dec. 31, 2010
385,900,000 
385,900,000 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
Net income
1,010 
 
979 
 
 
31 
1,010 
Shares issued - employee benefit plans
112 
113 
(1)
 
 
 
 
Shares issued - employee benefit plans (in shares)
500,000 
500,000 
 
 
 
 
 
Shares purchased
(828)
 
 
(828)
 
 
 
Shares reissued - employee benefit plans
(45)
(354)
(45)
354 
 
 
 
Tax benefit - employee benefit plans
36 
36 
 
 
 
 
 
Stock compensation expense
235 
235 
 
 
 
 
 
Dividends to stockholders
(200)
 
(200)
 
 
 
 
Change in net derivative gains/losses
(13)
 
 
 
(13)
 
(13)
Net foreign currency translation adjustments
(43)
 
 
 
(44)
(43)
Net post-retirement benefit obligation
(396)
 
 
 
(396)
 
(396)
Purchase of subsidiary shares from noncontrolling interests
(24)
(9)
 
 
 
(15)
 
Dividends paid to noncontrolling interests on subsidiary common stock
(30)
 
 
 
 
(30)
 
Comprehensive income
 
 
 
 
 
 
558 
Balance at Dec. 31, 2011
$ 8,120 
$ 4,407 
$ 8,594 
$ (2,553)
$ (2,370)
$ 42 
 
Balance (in shares) at Dec. 31, 2011
386,400,000 
386,400,000 
 
 
 
 
 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$ 1,010 
$ 732 
$ 792 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
(Gain) loss from sales of businesses, net
(6)
43 
(91)
Depreciation of fixed assets
220 
151 
149 
Amortization of intangible assets
362 
154 
93 
Stock compensation expense
235 
221 
209 
Deferred income taxes
146 
76 
138 
Change in assets and liabilities:
 
 
 
Fiduciary receivables
(14)
816 
358 
Short-term investments - funds held on behalf of clients
(713)
(19)
90 
Fiduciary liabilities
727 
(797)
(448)
Receivables, net
(494)
(69)
(63)
Accounts payable and accrued liabilities
 
(280)
(54)
Restructuring reserves
(73)
(64)
67 
Current income taxes
120 
 
(105)
Pension and other post employment liabilities
(399)
(130)
(404)
Other assets and liabilities
(103)
(51)
(231)
CASH PROVIDED BY OPERATING ACTIVITIES
1,018 
783 
500 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Sale of long-term investments
190 
90 
73 
Purchase of long-term investments
(30)
(34)
(158)
Net (purchase) sale of short-term investments - non-fiduciary
(8)
(337)
259 
Acquisition of businesses, net of cash acquired
(97)
(2,078)
(263)
Capital expenditures
(241)
(180)
(140)
CASH USED FOR INVESTING ACTIVITIES
(186)
(2,539)
(229)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Purchase of treasury stock
(828)
(250)
(590)
Issuance of stock for employee benefit plans
201 
194 
163 
Issuance of debt
1,673 
2,905 
1,093 
Repayment of debt
(1,688)
(816)
(1,118)
Cash dividends to stockholders
(200)
(175)
(165)
Purchase of shares from noncontrolling interests
(24)
(15)
(3)
Dividends paid to noncontrolling interests
(30)
(20)
(32)
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES
(896)
1,823 
(652)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
(10)
62 
16 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(74)
129 
(365)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
346 
217 
582 
CASH AND CASH EQUIVALENTS AT END OF YEAR
272 
346 
217 
Supplemental disclosures:
 
 
 
Interest paid
240 
158 
103 
Income taxes paid, net of refunds
77 
192 
182 
Non-cash transactions:
 
 
 
Acquisition of Hewitt, common stock issued and stock options assumed
 
$ 2,474 
 
Basis of Presentation
Basis of Presentation

1.    Basis of Presentation

        The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The consolidated financial statements include the accounts of Aon Corporation and all controlled subsidiaries ("Aon" or the "Company"). All material intercompany balances and transactions have been eliminated. The consolidated financial statements as of December 31, 2011 and 2010, and for the years ended December 31, 2011, 2010, and 2009, include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the Company's consolidated financial position, results of operations and cash flows for all periods presented.

Reclassifications and Change in Presentation

        Certain amounts in prior years' consolidated financial statements and related notes have been reclassified to conform to the 2011 presentation.

        Changes in the presentation of the Consolidated Statements of Cash Flows for 2010 and 2009 were made related to "Net (purchase) sales of short-term investments — funds held on behalf of clients." This line item had previously been presented in cash flows from investing activities and is now included in cash flows from operating activities. The Company believes this provides greater clarity into the operating and investing activities of the Company as this amount was offset by "Changes in funds held on behalf of clients" in the cash flows from operating activities. Although the Company invests funds held on behalf of clients, the handling of client money is believed to be part of the Company's day-to-day operating activities. The current year presentation separates "Fiduciary receivables," "Fiduciary liabilities," and "Short-term investments — funds held on behalf of clients" which, when taken together, net to zero. These three line items represent the changes in fiduciary funds when aggregated.

Use of Estimates

        The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on management's best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Aon adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, and foreign currency movements have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Summary of Significant Accounting Principles and Practices
Summary of Significant Accounting Principles and Practices

2.    Summary of Significant Accounting Principles and Practices

Revenue Recognition

        Risk Solutions segment revenues include insurance commissions and fees for services rendered and investment income on funds held on behalf of clients. Revenues are recognized when they are realized or realizable. The Company considers revenues to be earned and realized or realizable when there is persuasive evidence of an arrangement with a client, there is a fixed or determinable price, services have been rendered, and collectability is reasonably assured. For brokerage commissions, revenue is typically considered to be earned and realized or realizable at the completion of the placement process. Commission revenues are recorded net of allowances for estimated policy cancellations, which are determined based on an evaluation of historical and current cancellation data. Commissions on premiums billed directly by insurance carriers are recognized as revenue when the Company has sufficient information to conclude the amount due is determinable, which may not occur until cash is received from the insurance carrier. In instances when commissions relate to policy premiums that are billed in installments, revenue is recognized when the Company has sufficient information to determine the appropriate billing and the associated commission. Fees for services provided to clients are generally recognized ratably over the period that the services are rendered. Investment income is recognized as it is earned and realized or realizable.

        HR Solutions segment revenues consist primarily of fees paid by clients for consulting advice and outsourcing contracts. Fees paid by clients for consulting services are typically charged on an hourly, project or fixed-fee basis. Revenues from time-and-materials or cost-plus arrangements are recognized as services are performed. Revenues from fixed-fee contracts are generally recognized ratably over the term of the contract. Reimbursements received for out-of-pocket expenses are recorded as a component of revenues. The Company's outsourcing contracts typically have three-to-five year terms for benefits services and five-to-ten year terms for human resources business process outsourcing ("HR BPO") services. The Company recognizes revenues as services are performed. The Company also receives implementation fees from clients either up-front or over the ongoing services period as a component of the fee per participant. Lump sum implementation fees received from a client are initially deferred and generally recognized ratably over the ongoing contract services period. If a client terminates an outsourcing services arrangement prior to the end of the contract, a loss on the contract may be recorded, if necessary, and any remaining deferred implementation revenues would then be recognized into earnings over the remaining service period through the termination date. Services provided outside the scope of the Company's outsourcing contracts are recognized on a time-and-material or fixed-fee basis.

        In connection with the Company's long-term outsourcing service agreements, highly customized implementation efforts are often necessary to set up clients and their human resource or benefit programs on the Company's systems and operating processes. For outsourcing services sold separately or accounted for as a separate unit of accounting, specific, incremental and direct costs of implementation incurred prior to the services going live are generally deferred and amortized over the period that the related ongoing services revenue is recognized. Such costs may include internal and external costs for coding or customizing systems, costs for conversion of client data and costs to negotiate contract terms. For outsourcing services that are accounted for as a combined unit of accounting, specific, incremental and direct costs of implementation, as well as ongoing service delivery costs incurred prior to revenue recognition commencing, are deferred and amortized over the remaining contract services period. Contracts are assessed periodically to determine if they are onerous, in which case a loss is recognized in the current period. Deferred costs are assessed for recoverability to the extent the deferred cost exceeds related deferred revenue.

Stock Compensation Costs

        Share-based payments to employees, including grants of employee stock options, restricted stock and restricted stock units ("RSUs"), performance share awards ("PSAs") as well as employee stock purchases related to the Employee Stock Purchase Plan, are measured based on estimated grant date fair value. The Company recognizes compensation expense over the requisite service period for awards expected to ultimately vest. Forfeitures are estimated on the date of grant and revised if actual or expected forfeiture activity differs materially from original estimates.

Pension and Other Post-Retirement Benefits

        The Company has net period cost relating to its pension and other post-retirement benefit plans based on calculations that include various actuarial assumptions, including discount rates, assumed rates of return on plan assets, inflation rates, mortality rates, compensation increases, and turnover rates. The Company reviews its actuarial assumptions on an annual basis and modifies these assumptions based on current rates and trends. The effects of gains, losses, and prior service costs and credits are amortized over future service periods or future estimated lives if the plans are frozen. The funded status of each plan, calculated as the fair value of plan assets less the benefit obligation, is reflected in the Company's Consolidated Statements of Financial Position using a December 31 measurement date.

Net Income per Share

        Basic net income per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, including participating securities, which consist of unvested stock awards with non-forfeitable rights to dividends. Diluted net income per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, which have been adjusted for the dilutive effect of potentially issuable common shares (excluding those that are considered participating securities), including certain contingently issuable shares. The diluted earnings per share calculation reflects the more dilutive effect of either (1) the two-class method that assumes that the participating securities have not been exercised, or (2) the treasury stock method.

        Certain common stock equivalents, related primarily to options, were not included in the computation of diluted income per share because their inclusion would have been antidilutive.

Cash and Cash Equivalents

        Cash and cash equivalents include cash balances and all highly liquid investments with initial maturities of three months or less. Cash and cash equivalents included restricted balances of $191 million and $60 million at December 31, 2011 and 2010, respectively. The increase in the restricted balances is primarily due to a requirement for the Company to hold approximately $120 million of operating funds in the U.K.

Short-term Investments

        Short-term investments include certificates of deposit, money market funds and highly liquid debt instruments purchased with initial maturities in excess of three months but less than one year and are carried at amortized cost, which approximates fair value.

Fiduciary Assets and Liabilities

        In its capacity as an insurance agent and broker, Aon collects premiums from insureds and, after deducting its commission, remits the premiums to the respective insurers. Aon also collects claims or refunds from insurers on behalf of insureds. Uncollected premiums from insureds and uncollected claims or refunds from insurers are recorded as Fiduciary assets in the Company's Consolidated Statements of Financial Position. Unremitted insurance premiums and claims are held in a fiduciary capacity and the obligation to remit these funds is recorded as Fiduciary liabilities in the Company's Consolidated Statements of Financial Position. Some of the Company's outsourcing agreements also require it to hold funds to pay certain obligations on behalf of clients. These funds are also recorded as Fiduciary assets with the related obligation recorded as Fiduciary liabilities in the Company's Consolidated Statements of Financial Position.

        Aon maintained premium trust balances for premiums collected from insureds but not yet remitted to insurance companies of $4.2 billion and $3.5 billion at December 31, 2011 and 2010, respectively. These funds and a corresponding liability are included in Fiduciary assets and Fiduciary liabilities, respectively, in the accompanying Consolidated Statements of Financial Position.

Allowance for Doubtful Accounts

        The Company's allowance for doubtful accounts with respect to receivables is based on a combination of factors, including evaluation of historical write-offs, aging of balances and other qualitative and quantitative analyses. Receivables included an allowance for doubtful accounts of $104 million and $102 million at December 31, 2011 and 2010, respectively.

Fixed Assets

        Fixed assets are stated at cost, less accumulated depreciation. Included in this category is internal use software, which is software that is acquired, internally developed or modified solely to meet internal needs, with no plan to market externally. Costs related to directly obtaining, developing or upgrading internal use software are capitalized. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, which are generally as follows:

Asset Description
  Asset Life
 

Software

  3 to 7 years

Leasehold improvements

  Lesser of estimated useful life or lease term

Furniture, fixtures and equipment

  4 to 10 years

Computer equipment

  4 to 6 years

Buildings

  35 years

Automobiles

  6 years

Investments

        The Company accounts for investments as follows:

  • Equity method investments — Aon accounts for limited partnership and other investments using the equity method of accounting if Aon has the ability to exercise significant influence over, but not control of, an investee. Significant influence generally represents an ownership interest between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are initially recorded at cost and are subsequently adjusted for additional capital contributions, distributions, and Aon's proportionate share of earnings or losses.

    Cost method investments — Investments where Aon does not have an ownership interest of greater than 20% or the ability to exert significant influence over the operations of the investee are carried at cost.

    Fixed-maturity securities are classified as available for sale and are reported at fair value with any resulting unrealized gain or loss recorded directly to stockholders' equity as a component of Accumulated other comprehensive loss in the Company's Consolidated Statement of Financial Position, net of deferred income taxes. Interest on fixed-maturity securities is recorded in Interest income in the Company's Consolidated Statements of Income when earned and is adjusted for any amortization of premium or accretion of discount.

        The Company assesses any declines in the fair value of investments to determine whether such declines are other-than-temporary. This assessment is made considering all available evidence, including changes in general market conditions, specific industry and individual company data, the length of time and the extent to which the fair value has been less than cost, the financial condition and the near-term prospects of the entity issuing the security, and the Company's ability and intent to hold the investment until recovery of its cost basis. Other-than-temporary impairments of investments are recorded as part of Other income in the Consolidated Statements of Income in the period in which the determination is made.

Goodwill and Intangible Assets

        Goodwill represents the excess of acquisition cost over the fair value of the net assets in the acquisition of a business. Goodwill is allocated to various reporting units, which are one reporting level below the operating segment. Upon disposition of a business entity, goodwill is allocated to the disposed entity based on the fair value of that entity compared to the fair value of the reporting unit in which it was included. Goodwill is not amortized, but instead is tested for impairment at least annually. The goodwill impairment test is performed at the reporting unit level. Beginning in 2011, the Company initially performs a qualitative analysis to determine if it is more likely than not that the goodwill balance is impaired. If such a determination is made, then the Company will perform a two-step quantitative analysis. First, the fair value of each reporting unit is compared to its book value. If the fair value of the reporting unit is less than its book value, the Company performs a hypothetical purchase price allocation based on the reporting unit's fair value to determine the fair value of the reporting unit's goodwill. Fair value is determined using a combination of present value techniques and market prices of comparable businesses.

        Intangible assets include customer related and contract based assets representing primarily client relationships and non-compete covenants, trademarks, and marketing and technology related assets. These intangible assets, with the exception of trademarks, are amortized over periods ranging from 1 to 13 years, with a weighted average original life of 10 years. Trademarks are generally not amortized as such assets have been determined to have indefinite useful lives, and are tested at least annually for impairments using an analysis of expected future cash flows. Interim impairment testing may be performed when events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

Derivatives

        Derivative instruments are recognized in the Consolidated Statements of Financial Position at fair value. Where the Company has entered into master netting agreements with counterparties, the derivative positions are netted by counterparty and are reported accordingly in other assets or other liabilities. Changes in the fair value of derivative instruments are recognized immediately in earnings, unless the derivative is designated as a hedge and qualifies for hedge accounting.

        The Company has historically designated the following hedging relationships for certain transactions: (i) a hedge of the change in fair value of a recognized asset or liability or firm commitment ("fair value hedge"), (ii) a hedge of the variability in cash flows from a recognized variable-rate asset or liability or forecasted transaction ("cash flow hedge"), and (iii) a hedge of the net investment in a foreign operation ("net investment hedge"). For derivatives designated as hedges and that qualify as part of a hedging relationship, changes in fair value of the derivative instrument are deferred until the period in which the hedged item affects earnings.

        In order for a derivative to qualify for hedge accounting, the derivative must be formally designated as a fair value, cash flow, or a net investment hedge by documenting the relationship between the derivative and the hedged item. The documentation must include a description of the hedging instrument, the hedged item, the risk being hedged, Aon's risk management objective and strategy for undertaking the hedge, the method for assessing the effectiveness of the hedge, and the method for measuring hedge ineffectiveness. Additionally, the hedge relationship must be expected to be highly effective at offsetting changes in either the fair value or cash flows of the hedged item at both the inception of the hedge and on an ongoing basis. Aon assesses the ongoing effectiveness of its hedges and measures and records hedge ineffectiveness, if any, at the end of each quarter.

        For a derivative designated as hedging the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (a fair value hedge), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For a cash flow hedge that qualifies for hedge accounting, the effective portion of the change in fair value of a hedging instrument is recognized in Other Comprehensive Income ("OCI") and subsequently recognized in income when the hedged item affects earnings. The ineffective portion of the change in fair value is recognized immediately in earnings. For a net investment hedge, the effective portion of the change in fair value of the hedging instrument is recognized in OCI as part of the cumulative translation adjustment, while the ineffective portion is recognized immediately in earnings.

        Changes in the fair value of a derivative that is not designated as part of a hedging relationship (known as an "economic hedge") are recorded in either Interest income or Other general expenses (depending on the underlying exposure) in the Consolidated Statements of Income.

        The Company discontinues hedge accounting prospectively when (1) the derivative expires or is sold, terminated, or exercised, (2) the qualifying criteria are no longer met, or (3) management removes the designation of the hedge.

        When hedge accounting is discontinued because the derivative no longer qualifies as a fair value hedge, the Company continues to carry the derivative in the Consolidated Statements of Financial Position at its fair value, recognizes subsequent changes in the fair value of the derivative in the Consolidated Statements of Income, ceases to adjust the hedged asset or liability for changes in its fair value and accounts for the carrying amount (including the basis adjustment caused by designating the item as a hedged item) of the hedged asset, liability or firm commitment in accordance with GAAP applicable to those assets or liabilities.

        When hedge accounting is discontinued because the derivative continues to exist but no longer qualifies as a cash flow hedge, the Company continues to carry the derivative in the Consolidated Statements of Financial Position at its fair value, recognizes subsequent changes in the fair value of the derivative in the Consolidated Statements of Income, and continues to defer the derivative gain or loss in accumulated OCI (unless the forecasted transaction is deemed probable not to occur, at which time it would be reclassed to earnings) until the hedged forecasted transaction affects earnings. If the hedged forecasted transaction is not probable of occurring in the time period described in the hedge documentation or within a two month period of time thereafter, the deferred derivative gain or loss is immediately reclassified into earnings.

Foreign Currency

        Certain of the Company's non-US operations use their respective local currency as their functional currency. These operations that do not have the U.S. dollar as their functional currency translate their financial statements at the current rates of exchange in effect at the balance sheet date and revenues and expenses using rates that approximate those in effect during the period. The resulting translation adjustments are included as a component of stockholders' equity in Accumulated other comprehensive loss in the Consolidated Statements of Financial Position. Gains and losses from the remeasurement of monetary assets and liabilities that are denominated in a non-functional currency are included in Other general expenses within the Consolidated Statements of Income. The effect of foreign exchange gains and losses on the Consolidated Statements of Income was a gain of $10 million in 2011, and losses of $18 million and $26 million in 2010 and 2009, respectively. Included in these amounts were derivative losses of $20 million, $11 million and $15 million in 2011, 2010, and 2009, respectively.

Income Taxes

        Deferred income taxes are recognized for the effect of temporary differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted marginal tax rates and laws that are currently in effect. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in the period when the rate change is enacted.

        Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be objectively verified. Deferred tax assets are realized by having sufficient future taxable income to allow the related tax benefits to reduce taxes otherwise payable. The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carry-forwards, taxable income in carry-back years and tax planning strategies that are both prudent and feasible.

        The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than not. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company records penalties and interest related to unrecognized tax benefits in Income taxes in the Company's Consolidated Statements of Income.

Consolidation of Variable Interest Entities

        The Company uses two primary consolidation models under U.S. GAAP: the variable interest model, which is the primary model initially considered for all entities, and the voting model.

        Under the variable interest model, the Company consolidates a variable interest entity when it has a variable interest (or combination thereof) that provides the Company with a controlling financial interest. In determining if the Company has a controlling financial interest, management assesses the characteristics of the Company's variable interest (including involvement of related parties) in the variable interest entity, as well as the involvement of other variable interest holders. The Company has a controlling financial interest in a variable interest entity if it concludes that it has both (1) the power to direct the activities of the variable interest entity that are most important to the entity's economic performance and (2) the obligation to absorb losses and the right to receive benefits from the entity that could potentially be significant to the variable interest entity. If these conditions are met, the Company is the primary beneficiary of the variable interest entity and thus consolidates the entity in its Consolidated Financial Statements.

        For entities that fall under the voting model, the Company generally determines if it should consolidate the entity based on percentage ownership. Under this model, generally, if the Company owns more than 50% of the voting interest in the entity, it is consolidated.

Changes in Accounting Principles

Goodwill Impairment

        In September 2011, the Financial Accounting Standards Board ("FASB") issued final guidance on goodwill impairment that gives an entity the option to perform a qualitative assessment that may eliminate the requirement to perform the annual two-step test. The current two-step test requires an entity to assess goodwill for impairment by quantitatively comparing the fair value of a reporting unit with its carrying amount, including goodwill (Step 1). If the reporting unit's fair value is less than its carrying amount, Step 2 of the test must be performed to measure the amount of goodwill impairment, if any. The recently issued guidance gives an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity concludes that this is the case, it must perform the two-step test. Otherwise, the two-step test is not required. The Company early adopted this guidance in the fourth quarter 2011. The early adoption of this guidance did not have a material impact on the Company's financial statements.

Comprehensive Income

        In June 2011, the FASB issued guidance that updated principles related to the presentation of comprehensive income. The revised guidance will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements and eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The guidance, which must be applied retroactively, will be effective for Aon beginning in the first quarter 2012. The adoption of this guidance is expected to affect only the presentation of the consolidated financial statements, and will have no effect on the financial condition, results of operations or cash flows of the Company.

Fair Value Measurements

        On January 1, 2010, the Company adopted guidance requiring additional disclosures for fair value measurements. The amended guidance required entities to disclose additional information for assets and liabilities that are transferred between levels of the fair value hierarchy. This guidance also clarified existing guidance pertaining to the level of disaggregation at which fair value disclosures should be made and the requirements to disclose information about the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. The guidance also required entities to disclose information in the Level 3 rollforward about purchases, sales, issuances and settlements on a gross basis. See Note 15 "Fair Value Measurements and Financial Instruments" for these disclosures.

Revenue Recognition

        In September 2009, the FASB issued guidance that updated principles related to revenue recognition when there are multiple-element arrangements. This guidance related to the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting and modified the manner in which the transaction consideration is allocated across the separately identifiable deliverables. The guidance also expanded the disclosures required for multiple-element revenue arrangements. The effective date for this guidance was January 1, 2011. The Company early adopted this guidance in the fourth quarter 2010 and applied its requirements to revenue arrangements entered into or materially modified after January 1, 2010. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

Other Financial Data
Other Financial Data

3.    Other Financial Data

Consolidated Statements of Income Information

Other Income

        Other income consists of the following (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Equity earnings

  $ 7   $ 18   $ 18  

Realized gain (loss) on sale of investments

    18     (2 )   (1 )

(Loss) gain on disposal of businesses

        (4 )   13  

(Loss) gain on extinguishment of debt

    (19 )   (8 )   5  

Other

    (1 )   (4 )   (1 )
   

 

  $ 5   $   $ 34  
   

Consolidated Statements of Financial Position Information

Fixed Assets, net

        The components of Fixed assets, net are as follows (in millions):

As of December 31
  2011
  2010
 
   

Software

  $ 730   $ 662  

Leasehold improvements

    407     436  

Furniture, fixtures and equipment

    326     342  

Computer equipment

    274     245  

Land and buildings

    108     108  

Automobiles

    39     39  

Construction in progress

    87     45  
   

 

    1,971     1,877  

Less: Accumulated depreciation

    1,188     1,096  
   

Fixed assets, net

  $ 783   $ 781  
   

        Depreciation expense, which includes software amortization, was $220 million, $151 million, and $149 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Acquisitions and Dispositions
Acquisitions and Dispositions

4.    Acquisitions and Dispositions

        In 2011, the Company completed the acquisitions of Glenrand MIB Limited ("Glenrand") and three additional businesses in the Risk Solutions segment, as well as one business that is included in the HR Solutions segment.

        The aggregate consideration transferred and the value of intangible assets recorded (amounts within the measurement period are considered preliminary) at the acquisition date fair value as a result of the Company's acquisitions is as follows (in millions):

Years ended December 31
  2011
  2010
 
   

Consideration transferred:

             

Hewitt

  $   $ 4,932  

Other acquisitions

    103     157  
   

Total

  $ 103   $ 5,089  
   

Intangible assets:

             

Goodwill:

             

Hewitt

  $ 50   $ 2,715  

Other acquisitions

    76     59  

Other intangible assets:

             

Hewitt

        2,905  

Other acquisitions

    33     78  
   

Total

  $ 159   $ 5,757  
   

        Approximately $42 million of future payments relating primarily to earnouts is included in the 2010 total consideration. These amounts are recorded in Other current liabilities and Other non-current liabilities in the Consolidated Statements of Financial Position.

        In 2010, the Company completed the acquisitions of Hewitt Associates, Inc. ("Hewitt"), and the JP Morgan Compensation and Benefit Strategies Division of JP Morgan Retirement Plan Services, LLC, both of which are included in the HR Solutions segment, as well as other companies, which are included in the Risk Solutions segment.

        The results of operations of these acquisitions are included in the Consolidated Financial Statements from the dates they were acquired. These acquisitions, excluding Hewitt, would not produce a materially different result if they had been reported from the beginning of the period in which they were acquired.

Hewitt Associates, Inc.

        On October 1, 2010, the Company completed its acquisition of Hewitt (the "Acquisition"), one of the world's leading human resource consulting and outsourcing companies. Aon purchased all of the outstanding shares of Hewitt common stock in a cash-and-stock transaction valued at $4.9 billion, of which the total amount of cash paid and the total number of shares of stock issued by Aon each represented approximately 50% of the aggregate consideration.

        Hewitt provided leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt worked with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. Hewitt now operates globally together with Aon's existing consulting and outsourcing operations under the newly created Aon Hewitt brand.

        Under the terms of the acquisition agreement, each share of Class A common stock, par value $0.01 per share, of Hewitt ("Hewitt Common Stock") outstanding immediately prior to the acquisition date was converted into the right to receive, at the election of each of the holders of Hewitt Common Stock, (i) 0.6362 of a share of common stock, par value $1.00 per share, of Aon ("Aon Common Stock") and $25.61 in cash (the "Mixed Consideration"), (ii) 0.7494 shares of Aon Common Stock and $21.19 in cash (the "Stock Electing Consideration"), or (iii) $50.46 in cash (the "Cash Electing Consideration"). Pursuant to the terms of the acquisition agreement, the Cash Electing Consideration and the Stock Electing Consideration payable in the Acquisition were calculated based on the closing volume-weighted average price of Aon Common Stock on the New York Stock Exchange for the period of ten consecutive trading days ended on September 30, 2010, which was $39.0545, and the Stock Electing Consideration was subject to automatic proration and adjustment to ensure that the total amount of cash paid and the total number of shares of Aon Common Stock issued by Aon in the Acquisition each represented approximately 50% of the consideration, taking into account the rollover of the Hewitt stock options as described in the aquisition agreement.

        The final consideration transferred to acquire all of Hewitt's stock is as follows:

$ and common share data in millions, except per share data
   
   
 
   

Cash consideration

             

Cash electing consideration

             

Number of shares of Hewitt common shares outstanding electing cash consideration

    7.78        

Cash consideration per common share outstanding

  $ 50.46        
             

Total cash paid to Hewitt shareholders electing cash consideration

  $ 393        
             

Mixed consideration

             

Number of shares of Hewitt common shares outstanding electing mixed consideration or not making an election

    44.52        

Cash consideration per common share outstanding

  $ 25.61        
             

Total cash paid to Hewitt shareholders electing mixed consideration or not making an election

  $ 1,140        
             

Stock electing consideration

             

Number of shares of Hewitt common shares outstanding electing stock consideration

    43.67        

Cash consideration per common share outstanding

  $ 21.19        
             

Total cash paid to Hewitt shareholders electing stock consideration

  $ 925        
             

Total cash consideration

        $ 2,458  

Stock consideration

             

Stock electing consideration

             

Number of shares of Hewitt common shares outstanding electing stock consideration

    43.67        

Exchange ratio

    0.7494        
             

Aon shares issued to Hewitt stockholders electing stock consideration

    32.73        
             

Mixed consideration

             

Number of shares of Hewitt common shares outstanding electing mixed consideration or not making an election

    44.52        

Exchange ratio

    0.6362        
             

Aon shares issued to Hewitt shareholders electing mixed consideration or not making an election

    28.32        
             

Total Aon common shares issued

    61.05        
             

Aon's closing common share price as of October 1, 2010

  $ 39.28        
             

Total fair value of stock consideration

        $ 2,398  

Fair value of Hewitt stock options converted to options to acquire Aon common stock

        $ 76  
             

Total fair value of cash and stock consideration

        $ 4,932  
   

        The Company incurred certain acquisition and integration costs associated with the transaction that were expensed as incurred and are reflected in the Consolidated Statements of Income. The Company has recorded $47 million and $54 million of these Hewitt related costs in 2011 and 2010, respectively, of which $47 million and $40 million has been included in Other general expenses in 2011 and 2010, respectively, and $14 million, related to the cancellation of the bridge loan, has been included in Interest expense in 2010. The Company's HR Solutions segment has recorded $47 million and $19 million of these expenses in 2011 and 2010, respectively, with the remaining expense unallocated.

        The Company financed the Acquisition with the proceeds from a $1.0 billion three-year Term Loan Credit Facility, $1.5 billion in unsecured notes, and the issuance of 61 million shares of Aon common stock. In addition, as part of the consideration, certain outstanding Hewitt stock options were converted into options to purchase 4.5 million shares of Aon common stock. These items are detailed further in Note 8 "Debt" and Note 11 "Stockholders' Equity".

        The transaction has been accounted for using the acquisition method of accounting which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date (in millions):

 
  Amounts
recorded as of
the acquisition
date

 
   

Working capital (1)

  $ 348  

Property, equipment, and capitalized software

    297  

Identifiable intangible assets:

       

Customer relationships

    1,800  

Trademarks

    890  

Technology

    215  

Other noncurrent assets (2)

    344  

Long-term debt

    346  

Other noncurrent liabilities (3)

    360  

Net deferred tax liability (4)

    1,021  
   

Net assets acquired

    2,167  

Goodwill

    2,765  
   

Total consideration transferred

  $ 4,932  
   
(1)
Includes cash and cash equivalents, short-term investments, client receivables, other current assets, accounts payable and other current liabilities.

(2)
Includes primarily deferred contract costs and long-term investments.

(3)
Includes primarily unfavorable lease obligations and deferred contract revenues.

(4)
Included in Other current assets ($31 million), Deferred tax assets ($30 million), Other current liabilities ($7 million) and Deferred tax liabilities ($1.1 billion) in the Company's Consolidated Statements of Financial Position.

        The acquired customer relationships are being amortized over a weighted average life of 12 years. The technology asset is being amortized over 7 years and trademarks have been determined to have indefinite useful lives.

        Goodwill is calculated as the excess of the acquisition cost over the fair value of the net assets acquired and represents the synergies and other benefits that are expected to arise from combining the operations of Hewitt with the operations of Aon, and the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill is not amortized and is not deductible for tax purposes.

        A single estimate of fair value results from a complex series of the Company's judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company's judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations.

        The results of Hewitt's operations have been included in the Company's consolidated financial statements from the Acquisition date. The following table presents information for Hewitt that is included in Aon's Consolidated Statements of Income (in millions):

 
  Hewitt's operations
included in Aon's 2010
results

 
   

Revenues

  $ 791  

Operating income (1)

    23  
   
(1)
Includes amortization related to identifiable intangible assets ($37 million), acquisition and integration costs ($18 million) and restructuring expenses ($52 million).

        The following unaudited pro forma consolidated results of operations for 2010 and 2009 assume that the acquisition of Hewitt was completed as of January 1, 2009 (in millions, except per share amounts):

 
  2010
  2009
 
   

Revenue

  $ 10,831   $ 10,669  
   

Net income from continuing operations attributable to Aon stockholders

  $ 736   $ 758  
   

Earnings per share from continuing operations attributable to Aon stockholders

             

Basic

  $ 2.17   $ 2.20  

Diluted

  $ 2.14   $ 2.15  
   

        The unaudited pro forma consolidated results were prepared using the acquisition method of accounting and are based on the historical financial information of Aon and Hewitt, reflecting both in 2010 and 2009, Aon's and Hewitt's results of operations for a 12-month period. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what the Company's consolidated results of operations actually would have been had it completed the acquisition on January 1, 2009. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company nor do they reflect the expected realization of any cost savings associated with the acquisition. The unaudited pro forma consolidated results reflect primarily the following pro forma pre-tax adjustments:

  • Elimination of Hewitt's historical intangible asset amortization expense (approximately $16 million in 2010 and $20 million in 2009);

    Additional amortization expense (approximately $293 million in 2010 and $218 in 2009) related to the fair value of intangible assets acquired);

    Additional interest expense (approximately $43 million in 2010 and $77 million in 2009) associated with the incremental debt issued by the Company to partially finance the acquisition, the early retirement of Hewitt debt, and costs related to a bridge term loan credit agreement with certain financial institutions that has been terminated;

    Deferred revenues where no future performance obligation existed were eliminated at the acquisition date, and, as such, the recognition of deferred revenues by Hewitt in 2010 and 2009 is not reflected in the unaudited pro forma operating results. This resulted in $21 million in 2010 and $28 million in 2009 of deferred revenues recorded by Hewitt being eliminated;

    Deferred costs that did meet the definition of an asset were eliminated at the acquisition date, and, as such, the recognition of deferred costs by Hewitt in 2010 and 2009 is not reflected in the unaudited pro forma operating results. This resulted in $16 million in 2010 and $22 million in 2009 of deferred costs recorded by Hewitt being eliminated;

    Additional expense of $15 million incurred in 2010 and 2009 related to the recognition of the fair value of adjustments associated with the assumption of unfavorable lease obligations;

    The elimination of Hewitt's equity based compensation expense of $46 million in 2010 and $54 million in 2009. On the date of closing, all outstanding equity awards of Hewitt became fully vested and were converted at the effective time in accordance with the terms of the acquisition agreement. No compensation expense has been included in the unaudited pro forma consolidated results as the compensation programs for Aon Hewitt employees have not yet been determined and cannot be reasonably estimated; and

    Elimination of approximately $49 million of costs incurred in 2010, which are directly attributable to the acquisition, and which do not have a continuing impact on the combined company's operating results. Included in these costs are advisory, legal and regulatory costs, costs related to integrating the combined company, and costs to retire certain debt obligations assumed in the acquisition.

        In addition, all of the above adjustments were adjusted for the applicable tax impact. Aon has assumed a 38% combined statutory federal and state tax rate when estimating the tax effects of the adjustments to the unaudited pro forma combined statements of income.

Dispositions

        In 2011, the Company completed the disposition of 2 businesses in the Risk Solutions segment. No pretax gains or losses were recognized on these sales, which are included in Other income in the Consolidated Statements of Income.

        During 2010, the Company completed the disposition of 8 businesses, 7 in the Risk Solutions segment and 1 in the HR Solutions segment. Total pretax losses of $4 million were recognized on these sales, which are included in Other income in the Consolidated Statements of Income.

        During 2009, the Company completed the disposition of 9 businesses in the Risk Solutions segment. Total pretax gains of $15 million were recognized on these sales, which are included in Other income in the Consolidated Statements of Income.

Discontinued Operations

        In 2008, Aon reached a definitive agreement to sell AIS Management Corporation ("AIS"), which was previously included in the Risk Solutions segment, to Mercury General Corporation, for $120 million in cash at closing, plus a potential earn-out of up to $35 million payable over the two years following the completion of the agreement. The disposition was completed in January 2009 and resulted in a pretax gain of $86 million. The earn-out targets have not been met and therefore, Aon will not receive any of the potential earn-out payment.

        The operating results of businesses classified as discontinued operations are as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Revenues:

                   

AIS

  $   $   $  

Other

             
   

Total revenues

  $   $   $  

 

 

Income before income taxes:

                   

Operations:

                   

AIS

  $   $   $  

Other

            5  
   

 

            5  

Gain (loss) on sale:

                   

AIS

            86  

Other

    5     (39 )   (8 )
   

 

    5     (39 )   78  
   

Total pretax gain (loss)

  $ 5   $ (39 ) $ 83  

 

 

Net (loss) income:

                   

Operations

  $   $   $ 3  

Gain (loss) on sale

    4     (27 )   108  
   

Total

  $ 4   $ (27 ) $ 111  

 

 

        Gain (loss) on sale—Other for 2010 includes $38 million of expense for the settlement of legacy litigation related to the Buckner vs. Resource Life matter.

Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

5.    Goodwill and Other Intangible Assets

        The changes in the net carrying amount of goodwill by operating segment for the years ended December 31, 2011 and 2010, respectively, are as follows (in millions):

 
  Risk
Solutions

  HR
Solutions

  Total
 
   

Balance as of January 1, 2010

    5,693     385     6,078  

Goodwill related to Hewitt acquisition

        2,715     2,715  

Goodwill related to other acquisitions

    50     9     59  

Goodwill related to disposals

    (2 )       (2 )

Foreign currency revaluation

    (192 )   (11 )   (203 )
   

Balance as of December 31, 2010

  $ 5,549   $ 3,098   $ 8,647  

Goodwill related to acquisitions

    73     4     77  

Goodwill related to disposals

    (2 )       (2 )

Goodwill related to Hewitt acquisition

        50     50  

Goodwill related to other prior year acquisitions

        1     1  

Transfers

    (83 )   83      

Foreign currency revaluation

    20     (23 )   (3 )
   

Balance as of December 31, 2011

  $ 5,557   $ 3,213   $ 8,770  

 

 

        In 2011, the Company finalized the Hewitt purchase price allocation, adjusting goodwill principally for the completion of third party valuation reports, the impact of changes in actual employee severance costs compared to original estimates and the resolution of certain tax matters.

        Other intangible assets by asset class are as follows (in millions):

 
  As of December 31  
 
  2011   2010  
 
  Gross
Carrying
Amount

  Accumulated
Amortization

  Net
Carrying
Amount

  Gross
Carrying
Amount

  Accumulated
Amortization

  Net
Carrying
Amount

 
   

Intangible assets with indefinite lives:

                                     

Trademarks

  $ 1,024   $   $ 1,024   $ 1,024   $   $ 1,024  

 

                                   

Intangible assets with finite lives:

                                   

Trademarks

    4     1     3     3         3  

Customer related and contract based

    2,608     615     1,993     2,605     344     2,261  

Marketing, technology and other

    606     350     256     606     283     323  
   

 

  $ 4,242   $ 966   $ 3,276   $ 4,238   $ 627   $ 3,611  

 

 

        Amortization expense on intangible assets was $362 million, $154 million and $93 million in 2011, 2010 and 2009, respectively. The estimated future amortization for intangible assets, inclusive of the impact of the transfer of the Health and Benefits Consulting business from the HR Solutions segment to the Risk Solutions segment effective January 1, 2012, as of December 31, 2011 is as follows (in millions):

 
  HR
Solutions

  Risk
Solutions

  Total
 
   

2012

  $ 294   $ 117   $ 411  

2013

    275     109     384  

2014

    239     95     334  

2015

    208     81     289  

2016

    174     71     245  

Thereafter

    468     121     589  
   

 

  $ 1,658   $ 594   $ 2,252  

 

 
Restructuring
Restructuring

6.    Restructuring

Aon Hewitt Restructuring Plan

        On October 14, 2010, Aon announced a global restructuring plan ("Aon Hewitt Plan") in connection with the acquisition of Hewitt. The Aon Hewitt Plan is intended to streamline operations across the combined Aon Hewitt organization and includes an estimated 1,500 to 1,800 job eliminations. The Company expects these restructuring activities and related expenses to affect continuing operations into 2013. The Aon Hewitt Plan is expected to result in cumulative costs of approximately $325 million through the end of the plan, consisting of approximately $180 million in employee termination costs and approximately $145 million in real estate rationalization costs. As of December 31, 2011, approximately 1,080 jobs have been eliminated under the Aon Hewitt Plan. For the years ended December 31, 2011 and 2010, the Company recorded $105 million and $52 million of total expense, respectively. Charges related to the restructuring are included in Compensation and benefits and Other general expenses in the accompanying Consolidated Statements of Income.

        The following summarizes restructuring and related costs by type that have been incurred and are estimated to be incurred through the end of the restructuring initiative related to the Aon Hewitt Plan (in millions):

 
  2011
  2010
  Estimated
Total Cost for
Restructuring
Plan (1)

 
   

Workforce reduction

  $ 64   $ 49   $ 180  

Lease consolidation

    32     3     95  

Asset impairments

    7         47  

Other costs associated with restructuring (2)

    2         3  
   

Total restructuring and related expenses

  $ 105   $ 52   $ 325  

 

 
(1)
Actual costs, when incurred, may vary due to changes in the assumptions built into this plan. Significant assumptions that may change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives.

(2)
Other costs associated with restructuring initiatives, including moving costs and consulting and legal fees, are recognized when incurred.

        The following summarizes the restructuring and related expenses, by segment, that have been incurred and are estimated to be incurred through the end of the restructuring initiative related to the Aon Hewitt Plan (in millions):

 
  2011
  2010
  Estimated
Total Cost for
Restructuring
Plan

 
   

HR Solutions

  $ 90   $ 52   $ 297  

Risk Solutions

    15         28  
   

Total restructuring and related expenses

  $ 105   $ 52   $ 325  

 

 

Aon Benfield Restructuring Plan

        The Company announced a global restructuring plan ("Aon Benfield Plan") in conjunction with its acquisition of Benfield in 2008. The Aon Benfield Plan is intended to integrate and streamline operations across the combined Aon Benfield organization. The Aon Benfield Plan includes an estimated 800 job eliminations. Additionally, duplicate space and assets will be abandoned. The Company originally estimated that the Aon Benfield Plan would result in cumulative costs totaling approximately $185 million over a three-year period, of which $104 million was recorded as part of the Benfield purchase price allocation and $81 million of which was expected to result in future charges to earnings. During 2009, the Company reduced the Benfield purchase price allocation by $49 million to reflect actual severance costs being lower than originally estimated. The Company currently estimates the Aon Benfield Plan will result in cumulative costs totaling approximately $160 million, of which $53 million was recorded as part of the purchase price allocation, $19 million, $26 million and $55 million has been recorded in earnings during 2011, 2010 and 2009, respectively, and an estimated additional $7 million will be recorded in future earnings.

        As of December 31, 2011, approximately 785 jobs have been eliminated under the Aon Benfield Plan. Total cash payments of $129 million have been made under the Aon Benfield Plan, from inception to date.

        All costs associated with the Aon Benfield Plan are included in the Risk Solutions segment. Charges related to the restructuring are included in Compensation and benefits and Other general expenses in the accompanying Consolidated Statements of Income. The plan was closed in January 2012.

        The following summarizes the restructuring and related costs by type that have been incurred and are estimated to be incurred through the end of the restructuring initiative related to the Aon Benfield Plan (in millions):

 
  Purchase
Price
Allocation

  2009
  2010
  2011
  Total to
Date

  Estimated
Total Cost for
Restructuring
Period (1)

 
   

Workforce reduction

  $ 32   $ 38   $ 15   $ 33   $ 118   $ 125  

Lease consolidation

    20     14     7     (15 )   26     26  

Asset impairments

        2     2         4     4  

Other costs associated with restructuring (2)

    1     1     2     1     5     5  
   

Total restructuring and related expenses

  $ 53   $ 55   $ 26   $ 19   $ 153   $ 160  

 

 
(1)
Actual costs, when incurred, may vary due to changes in the assumptions built into this plan. Significant assumptions that may change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives.

(2)
Other costs associated with restructuring initiatives, including moving costs and consulting and legal fees, are recognized when incurred.

2007 Restructuring Plan

        In 2007, the Company announced a global restructuring plan intended to create a more streamlined organization and reduce future expense growth to better serve clients ("2007 Plan"). The 2007 Plan resulted in approximately 4,700 job eliminations and closure or consolidation of several offices resulting in sublease losses or lease buy-outs. The total cumulative pretax charges for the 2007 Plan was $737 million including costs related to workforce reduction, lease consolidation costs, asset impairments, as well as other expenses necessary to implement the restructuring initiative. Costs related to the restructuring are included in Compensation and benefits and Other general expenses in the accompanying Consolidated Statements of Income. The Company does not expect any further expenses to be incurred in relation to the 2007 Plan.

        The following summarizes the restructuring and related expenses by type that have been incurred related to the 2007 Plan (in millions):

 
  2007
  2008
  2009
  2010
  2011
  Total 2007
Plan

 
   

Workforce reduction

  $ 17   $ 166   $ 251   $ 72   $ (2 ) $ 504  

Lease consolidation

    22     38     78     15     (9 ) $ 144  

Asset impairments

    4     18     15     2       $ 39  

Other costs associated with restructuring (1)

    3     29     13     5       $ 50  
   

Total restructuring and related expenses

  $ 46   $ 251   $ 357   $ 94   $ (11 ) $ 737  

 

 
(1)
Other costs associated with restructuring initiatives include moving costs and consulting and legal fees.

        The following summarizes the restructuring and related expenses, by segment, that have been incurred related to the 2007 Plan (in millions):

 
  2007
  2008
  2009
  2010
  2011
  Total 2007
Plan

 
   

Risk Solutions

  $ 41   $ 234   $ 322   $ 84   $ (10 ) $ 671  

HR Solutions

    5     17     35     10     (1 ) $ 66  
   

Total restructuring and related expenses

  $ 46   $ 251   $ 357   $ 94   $ (11 ) $ 737  

 

 

        As of December 31, 2011, the Company's liabilities for its restructuring plans are as follows (in millions):

 
  Aon
Hewitt
Plan

  Aon
Benfield
Plan

  2007
Plan

  Other
  Total
 
   

Balance at January 1, 2009

  $   $ 104   $ 101   $ 28   $ 233  

Expensed

        53     342     (1 )   394  

Cash payments

        (67 )   (248 )   (12 )   (327 )

Purchase accounting adjustment

        (49 )           (49 )

Foreign exchange translation and other

        4     7     1     12  
       

Balance at December 31, 2009

  $   $ 45   $ 202   $ 16   $ 263  
       

Assumed Hewitt restructuring liability (1)

    43                 43  

Expensed

    52     24     92         168  

Cash payments

    (8 )   (38 )   (178 )   (8 )   (232 )

Foreign exchange translation and other

    1     (5 )   (3 )   2     (5 )
       

Balance at December 31, 2010

  $ 88   $ 26   $ 113   $ 10   $ 237  
       

Expensed

    98     19     (11 )       106  

Cash payments

    (93 )   (24 )   (59 )   (2 )   (178 )

Foreign exchange translation and other

    2     (1 )   7         8  
   

Balance at December 31, 2011

  $ 95   $ 20   $ 50   $ 8   $ 173  

 

 
(1)
The Company assumed a $43 million net real estate related restructuring liability in connection with the Hewitt acquisition.

        Aon's unpaid restructuring liabilities are included in both Accounts payable and accrued liabilities and Other non-current liabilities in the Consolidated Statements of Financial Position.

Investments
Investments

7.    Investments

        The Company earns income on cash balances and investments, as well as on premium trust balances that Aon maintains for premiums collected from insureds but not yet remitted to insurance companies, and funds held under the terms of certain outsourcing agreements to pay certain obligations on behalf of clients. Premium trust balances and a corresponding liability are included in Fiduciary assets and Fiduciary liabilities in the accompanying Consolidated Statements of Financial Position.

        The Company's interest-bearing assets and other investments are included in the following categories in the Consolidated Statements of Financial Position (in millions):

As of December 31
  2011
  2010
 
   

Cash and cash equivalents

  $ 272   $ 346  

Short-term investments

    785     785  

Fiduciary assets (1)

    4,190     3,489  

Investments

    239     312  
   

 

  $ 5,486   $ 4,932  

 

 
(1)
Fiduciary assets does not include fiduciary receivables

        The Company's investments are as follows (in millions):

As of December 31
  2011
  2010
 
   

Equity method investments

  $ 164   $ 174  

Other investments, at cost (1)

    60     123  

Fixed-maturity securities

    15     15  
   

 

  $ 239   $ 312  

 

 
(1)
The reduction in other investments, at cost is primarily due to sales and redemptions

Unconsolidated Variable Interest Entities

        Aon has an ownership interest in Juniperus Insurance Opportunity Fund Limited ("Juniperus"), which is an investment vehicle that invests in an actively managed and diversified portfolio of insurance risks. Aon has concluded that Juniperus is a VIE. However, Aon has concluded that it is not the primary beneficiary as it lacks the power to direct the activities of Juniperus that most significantly impact economic performance, and therefore this entity is not consolidated. The investment in Juniperus is accounted for using the equity method of accounting.

        The Company's potential loss at December 30, 2011 is limited to its investment in Juniperus of $65 million, which is recorded in Investments in the Condensed Consolidated Statements of Financial Position. In January 2012, the Company entered into an agreement to redeem its equity interest in Juniperus Capital Holdings Limited ("JCHL") and the Company expects to redeem its investment in Juniperus in 2012.

Debt
Debt

8.    Debt

        The following is a summary of outstanding debt (in millions):

As of December 31
  2011
  2010
 
   

Term loan credit facility due October 2013 (LIBOR + 1.38%)

  $ 428   $  

Term loan credit facility (LIBOR + 2.5%)

        975  

8.205% junior subordinated deferrable interest debentures due January 2027

    687     687  

6.25% EUR 500 debt securities due July 2014

    653     667  

5.00% senior notes due September 2020

    598     598  

3.50% senior notes due September 2015

    597     597  

3.125% senior notes due May 2016

    500      

4.76% CAD 375 debt securities due March 2018

    368      

5.05% CAD 375 debt securities due April 2011

        372  

6.25% senior notes due September 2040

    297     297  

7.375% debt securities due December 2012

    225     225  

Other

    139     88  
   

Total debt

    4,492     4,506  

Less short-term and current portion of long-term debt

    337     492  
   

Total long-term debt

  $ 4,155   $ 4,014  

 

 

        At December 31, 2011, the Company had $50 million in commercial paper outstanding. The Company uses the proceeds from the commercial paper market from time to time to meet short term working capital needs.

        On May 24, 2011, Aon entered into an underwriting agreement for the sale of $500 million of 3.125% unsecured Senior Notes due 2016 (the "Notes"). On June 15, 2011, Aon entered into a Term Credit Agreement for unsecured term loan financing of $450 million ("2011 Term Loan Facility") due on October 1, 2013. The 2011 Term Loan Facility is a variable rate loan that is based on LIBOR plus a margin and at December 31, 2011, the effective annualized rate was approximately 1.67%. The Company used the net proceeds from the Notes issuance and 2011 Term Loan Facility borrowings to repay all amounts outstanding under its $1.0 billion three-year credit agreement dated August 13, 2010 ("2010 Term Loan Facility"), which was entered into in connection with the acquisition of Hewitt. The Company recorded a $19 million loss on the extinguishment of the 2010 Term Loan Facility as a result of the write-off of the deferred financing costs, which is included in Other income (expense) in the Consolidated Statements of Income.

        On March 8, 2011, an indirect wholly-owned subsidiary of Aon issued CAD 375 million ($368 at December 31, 2011 exchange rates) of 4.76% senior unsecured debt securities, which are due in March 2018 and are guaranteed by the Company. The Company used the net proceeds from this issuance to repay its CAD 375 million 5.05% debt securities upon their maturity on April 12, 2011.

        On August 13, 2010, in connection with the acquisition of Hewitt, Aon entered into an unsecured three-year Term Credit Agreement (the "2010 Term Loan Credit Facility"), which provided unsecured term loan financing of up to $1.0 billion. This Term Loan Credit Facility has an interest rate of LIBOR + 2.5%. The Company borrowed $1.0 billion under this facility on October 1, 2010 to finance a portion of the Hewitt purchase price. The Company incurred $26 million of deferred finance costs associated with the Term Loan Credit Facility that were to be amortized over the term of the loan. Concurrent with entering into the Term Loan Credit Facility, the Company also entered into a Senior Bridge Term Loan Credit Agreement which provided unsecured bridge financing of up to $1.5 billion (the "Bridge Loan Facility") to finance a portion of the Hewitt purchase price.

        In lieu of drawing under the Bridge Loan Facility, on September 7, 2010, Aon entered into an Underwriting Agreement (the "Underwriting Agreement") with several underwriters with respect to the offering and sale by the Company of $600 million aggregate principal amount of its 3.50% Senior Notes due 2015 (the "2015 Notes"), $600 million aggregate principal amount of its 5.00% Senior Notes due 2020 (the "2020 Notes") and $300 million aggregate principal amount of its 6.25% Senior Notes due 2040 (the "2040 Notes" and, together with the 2015 Notes and 2020 Notes, the "Notes") under the Company's Registration Statement on Form S-3. All of these Notes are unsecured. Deferred financing costs associated with the Notes of $12 million were capitalized and are included in Other non-current assets, and will be amortized over the respective term of each note. In 2011, the Company recorded $2 million of deferred financing cost amortization for both the Term Loan Credit Facility and the Notes, which is included in Interest expense in the Consolidated Statements of Income. Following the issuance of these Notes, on September 15, 2010, the Bridge Loan Facility was terminated and the Company recorded $14 million of related deferred financing costs in the Consolidated Statements of Income.

        As part of the Hewitt acquisition, the Company assumed $346 million of long-term debt including $299 million of privately placed senior unsecured notes with varying maturity dates. As of December 31, 2010, all of these notes had matured or have been early extinguished. Also, in 2010, $47 million in long-term debt held by PEPS I, a consolidated VIE, was repurchased with a majority of the PEPS I restricted cash.

        On October 15, 2010, the Company entered into a new €650 million ($849 million at December 31, 2011 exchange rates) multi-currency revolving loan credit facility (the "Euro Facility") used by certain of Aon's European subsidiaries. The Euro Facility replaced the previous facility which was entered into in October 2005 and matured in October 2010 (the "2005 Facility"). The Euro Facility expires in October 2015 and has commitment fees of 8.75 basis points payable on the unused portion of the facility, similar to the 2005 Facility. Aon has guaranteed the obligations of its subsidiaries with respect to this facility. The Company had no borrowings under the Euro Facility.

        In December 2009, Aon cancelled its $600 million 5-year U.S. committed bank credit facility that was to expire in February 2010 and entered into a new $400 million, 3-year facility to support commercial paper and other short-term borrowings. Based on Aon's current credit ratings, commitment fees of 35 basis points are payable on the unused portion of the facility. At December 31, 2011, Aon had no borrowings under this facility.

        On July 1, 2009, an indirect wholly-owned subsidiary of Aon issued €500 million ($653 million at December 31, 2011 exchange rates) of 6.25% senior unsecured debentures due on July 1, 2014. The carrying value of the debt includes $11 million related to hedging activities. The payment of the principal and interest on the debentures is unconditionally and irrevocably guaranteed by Aon. Proceeds from the offering were used to repay the Company's $677 million outstanding indebtedness under its 2005 Facility.

        In 1997, Aon created Aon Capital A, a wholly-owned statutory business trust ("Trust"), for the purpose of issuing mandatorily redeemable preferred capital securities ("Capital Securities"). Aon received cash and an investment in 100% of the common equity of Aon Capital A by issuing 8.205% Junior Subordinated Deferrable Interest Debentures (the "Debentures") to Aon Capital A. These transactions were structured such that the net cash flows from Aon to Aon Capital A matched the cash flows from Aon Capital A to the third party investors. Aon determined that it was not the primary beneficiary of Aon Capital A, a VIE, and, thus reflected the Debentures as long-term debt. During the first half of 2009, Aon repurchased $15 million face value of the Capital Securities for approximately $10 million, resulting in a $5 million gain, which was reported in Other income in the Consolidated Statements of Income. To facilitate the legal release of the obligation created through the Debentures associated with this repurchase and future repurchases, Aon dissolved the Trust effective June 25, 2009. This dissolution resulted in the exchange of the Capital Securities held by third parties for the Debentures. Also in connection with the dissolution of the Trust, the $24 million of common equity of Aon Capital A held by Aon was exchanged for $24 million of Debentures, which were then cancelled. Following these actions, $687 million of Debentures remain outstanding. The Debentures are subject to mandatory redemption on January 1, 2027 or are redeemable in whole, but not in part, at the option of Aon upon the occurrence of certain events.

        There are a number of covenants associated with both the U.S. and Euro facilities, the most significant of which require Aon to maintain a ratio of consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization), adjusted for Hewitt related transaction costs and up to $50 million in non-recurring cash charges ("Adjusted EBITDA"), to consolidated interest expense of 4 to 1 and a ratio of consolidated debt to Adjusted EBITDA, of not greater than 3 to 1. Aon was in compliance with all debt covenants at December 31, 2011.

        Other than the Debentures, outstanding debt securities are not redeemable by Aon prior to maturity. There are no sinking fund provisions. Interest is payable semi-annually on most debt securities.

        Repayments of total debt are as follows (in millions):

2012

  $ 337  

2013

    404  

2014

    673  

2015

    612  

2016

    509  

Thereafter

    1,957  
   

 

  $ 4,492  
   

        The weighted-average interest rates on Aon's short-term borrowings were 0.5%, 0.7%, and 1.5% for the years ended December 31, 2011, 2010, and 2009, respectively.

Lease Commitments
Lease Commitments

9.    Lease Commitments

        Aon leases office facilities, equipment and automobiles under non-cancelable operating leases. These leases expire at various dates and may contain renewal and expansion options. In addition to base rental costs, occupancy lease agreements generally provide for rent escalations resulting from increased assessments for real estate taxes and other charges. Approximately 88% of Aon's lease obligations are for the use of office space.

        In November 2011, Aon entered into an agreement to lease office space in a new building to be constructed in London, United Kingdom. The agreement is contingent upon the completion of the building construction. Aon expects to move into the new building in 2015 when it exercises an early break option at another leased facility. The Company has included the future minimum rental payments for this leased space in the schedule below and has excluded the future minimum rental payments for the existing lease beyond the expected date of the exercise of the break option.

        Rental expenses (including amounts applicable to taxes, insurance and maintenance) for operating leases are as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   
Rental expense   $ 525   $ 429   $ 346  
Sub lease rental income     71     57     52  
   

Net rental expense

  $ 454   $ 372   $ 294  
   

        At December 31, 2011, future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year, net of sublease rental income, are as follows (in millions):

2012

  $ 395  

2013

    373  

2014

    334  

2015

    296  

2016

    257  

Thereafter

    984  
   

Total minimum payments required

  $ 2,639  
   
Income Taxes
Income Taxes

10.  Income Taxes

        Aon and its principal domestic subsidiaries are included in a consolidated U.S. federal income tax return. Aon's international subsidiaries file various income tax returns in their jurisdictions.

        Income from continuing operations before income tax and the provision for income tax consist of the following (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Income from continuing operations before income taxes:

                   

U.S.

  $ 301   $ 21   $ 215  

International

    1,083     1,038     734  
       

Total

  $ 1,384   $ 1,059   $ 949  
   

Income taxes (benefit):

                   

Current:

                   

U.S. federal

  $ (17 ) $ 16   $ 32  

U.S. state and local

    35     10     23  

International

    217     202     150  
       

Total current

    235     228     205  
   

Deferred:

                   

U.S. federal

    109     47     49  

U.S. state and local

    14     13     5  

International

    20     12     9  
       

Total deferred

    143     72     63  
   

Total income tax expense

  $ 378   $ 300   $ 268  
   

        Income from continuing operations before income taxes shown above is based on the location of the business unit to which such earnings are attributable for tax purposes. However, taxable income may not correspond to the geographic attribution of the income from continuing operations before income taxes shown above due to the treatment of certain items, such as the costs associated with the Hewitt acquisition. In addition, because the earnings shown above may in some cases be subject to taxation in more than one country, the income tax provision shown above as U.S. or International may not correspond to the geographic attribution of the earnings.

        A reconciliation of the income tax provisions based on the U.S. statutory corporate tax rate to the provisions reflected in the Consolidated Financial Statements is as follows:

Years ended December 31
  2011
  2010
  2009
 
   

Statutory tax rate

    35.0 %   35.0 %   35.0 %

State income taxes, net of federal benefit

    2.3     1.1     2.0  

Taxes on international operations

    (11.5 )   (12.5 )   (12.0 )

Nondeductible expenses

    3.5     3.9     3.4  

Adjustments to prior year tax requirements

    (1.1 )   0.5     0.1  

Deferred tax adjustments, including

                   

statutory rate changes

    (0.8 )   0.2     0.1  

Other — net

    (0.1 )   0.2     (0.4 )
   

Effective tax rate

    27.3     28.4     28.2  
   

        The components of Aon's deferred tax assets and liabilities are as follows (in millions):

As of December 31
  2011
  2010
 
   

Deferred tax assets:

             

Employee benefit plans

  $ 940   $ 929  

Net operating loss and tax credit carryforwards

    484     430  

Other accrued expenses

    154     161  

Investment basis differences

    17     17  

Other

    100     66  
       

Total

    1,695     1,603  

Valuation allowance on deferred tax assets

    (219 )   (257 )
       

Total

  $ 1,476   $ 1,346  
   

Deferred tax liabilities:

             

Intangibles

  $ (1,333 ) $ (1,420 )

Deferred revenue

    (83 )   (49 )

Other accrued expenses

    (121 )   (41 )

Unrealized investment gains

    (21 )   (5 )

Unrealized foreign exchange gains

    (23 )   (23 )

Other

    (40 )   (75 )
       

Total

  $ (1,621 ) $ (1,613 )
   

Net deferred tax liability

  $ (145 ) $ (267 )
   

        Deferred income taxes (assets and liabilities have been netted by jurisdiction) have been classified in the Consolidated Statements of Financial Position as follows (in millions):

As of December 31,
  2011
  2010
 
   

Deferred tax assets — current

  $ 19   $ 121  

Deferred tax assets — non-current

    258     305  

Deferred tax liabilities — current

    (121 )   (30 )

Deferred tax liabilities — non-current

    (301 )   (663 )
   

Net deferred tax liability

  $ (145 ) $ (267 )
   

        Valuation allowances have been established primarily with regard to the tax benefits of certain net operating loss and tax credit carryforwards. Valuation allowances decreased by $35 million in 2011, primarily attributable to the change of the following items: a decrease in the valuation allowances of $13 million due to the sale of a subsidiary in UK, a decrease of $24 million in the valuation allowances for U.S. foreign tax credit carryforwards, and an increase of $7 million in the valuation allowances for an interest expense carryforward for Germany.

        Aon recognized, as an adjustment to additional paid-in-capital, income tax benefits attributable to employee stock compensation of $36 million, $20 million and $25 million in 2011, 2010 and 2009, respectively.

        U.S. deferred income taxes are not provided on unremitted foreign earnings that are considered permanently reinvested, which at December 31, 2011 amounted to approximately $3.0 billion. It is not practicable to determine the income tax liability that might be incurred if all such earnings were remitted to the U.S. due to foreign tax credits and exclusions that may become available at the time of remittance.

        At December 31, 2011, Aon had domestic federal operating loss carryforwards of $37million that will expire at various dates from 2012 to 2024, state operating loss carryforwards of $622 million that will expire at various dates from 2012 to 2031, and foreign operating and capital loss carryforwards of $886 million and $314 million, respectively, nearly all of which are subject to indefinite carryforward.

Unrecognized Tax Provisions

        The following is a reconciliation of the Company's beginning and ending amount of unrecognized tax benefits (in millions):

 
  2011
  2010
 
   

Balance at January 1

  $ 100   $ 77  

Additions based on tax positions related to the current year

    8     7  

Additions for tax positions of prior years

    5     4  

Reductions for tax positions of prior years

    (16 )   (7 )

Settlements

    (15 )   (1 )

Lapse of statute of limitations

    (4 )   (5 )

Acquisitions

    40     26  

Foreign currency translation

        (1 )
   

Balance at December 31

  $ 118   $ 100  
   

        As of December 31, 2011, $116 million of unrecognized tax benefits would impact the effective tax rate if recognized. Aon does not expect the unrecognized tax positions to change significantly over the next twelve months.

        The Company recognizes penalties and interest related to unrecognized income tax benefits in its provision for income taxes. Aon accrued potential penalties of less than $1 million in 2011 and $1 million in both 2010 and 2009. Aon accrued interest of less than $1 million in 2011and 2010, respectively. Aon has recorded a liability for penalties of less than $2 million and $5 million for 2011 and 2010 respectively and for interest less than $17 million and $18 million, respectively.

        Aon and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various state and international jurisdictions. Aon has substantially concluded all U.S. federal income tax matters for years through 2007. Material U.S. state and local income tax jurisdiction examinations have been concluded for years through 2005. Aon has concluded income tax examinations in its primary international jurisdictions through 2004.

Stockholders' Equity
Stockholders' Equity

11.  Stockholders' Equity

Common Stock

        On October 1, 2010, the Company issued 61 million shares of common stock as consideration for part of the purchase price of Hewitt (See Note 4 "Acquisitions and Dispositions"). In addition, as part of the consideration, each outstanding unvested Hewitt stock option became fully vested and was converted into an option to purchase Aon common stock with the same terms and conditions as the Hewitt stock option. As of the acquisition date, there were approximately 4.5 million options to purchase Aon common stock issued to former holders of Hewitt stock options, of which 1.2 million remain outstanding and exercisable.

        In the fourth quarter of 2007, the Board of Directors increased the authorized share repurchase program to $4.6 billion. As of March 31, 2011, this program was fully utilized upon the repurchase of 118.7 million shares of common stock at an average price (excluding commissions) of $40.97 per share in the first quarter 2011, for an aggregate purchase price of $4.6 billion since inception of this stock repurchase program.

        In January 2010, the Board of Directors authorized a new share repurchase program under which up to $2 billion of common stock may be repurchased from time to time depending on market conditions or other factors through open market or privately negotiated transactions (2010 Share Repurchase Plan). In 2011, the Company repurchased 16.4 million shares, primarily through this program through the open market or in privately negotiated transactions at an average price (excluding commissions) of $50.39 per share. Shares may be repurchased through the open market or in privately negotiated transactions, including structured repurchase programs.

        Since the inception of its share repurchase program in 2005, Aon has repurchased a total of 128.3 million shares at an aggregate cost of $5.4 billion. As of December 31, 2011, Aon was authorized to purchase up to $1.2 billion of additional shares under the 2010 Share Repurchase Plan.

        In 2011, Aon issued 0.5 million shares of common stock in relation to the exercise of options issued to the former holders of Hewitt options as part of the Hewitt acquisition. In addition, Aon reissued 7.8 million shares of treasury stock for employee benefit programs and 0.6 million shares in connection with employee stock purchase plans. In 2010, Aon issued 2.2 million shares of common stock in relation to the exercise of options issued to former holders of Hewitt options as part of the Hewitt acquisition. In addition, Aon reissued 8.5 million shares of treasury stock for employee benefit programs and 0.4 million shares in connection with employee stock purchase plans. In 2009, Aon issued 1.0 million new shares of common stock for employee benefit plans. In addition, Aon reissued 8.0 million shares of treasury stock for employee benefit programs and 0.5 million shares in connection with employee stock purchase plans.

        In December 2010, Aon retired 40 million shares of treasury stock.

        In connection with the acquisition of two entities controlled by Aon's then-Chairman and Chief Executive Officer in 2001, Aon obtained approximately 22.4 million shares of its common stock. These treasury shares are restricted as to their reissuance.

Participating Securities

        Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities, as defined, and therefore, are included in computing basic and diluted earnings per share using the two class method. Certain of Aon's restricted stock awards allow the holder to receive a non-forfeitable dividend equivalent.

        Income from continuing operations, income from discontinued operations and net income, attributable to participating securities, were as follows (in millions):

 
  Year ended December 31,  
 
  2011
  2010
  2009
 
   

Income from continuing operations

  $ 13   $ 15   $ 15  

Income from discontinued operations

            3  
   

Net income

  $ 13   $ 15   $ 18  
   

        Weighted average shares outstanding are as follows (in millions):

 
  Year ended December 31,  
 
  2011
  2010
  2009
 
   

Shares for basic earnings per share (1)

    335.5     293.4     283.2  

Potentially issuable common shares

    5.4     4.7     7.9  
   

Shares for diluted earnings per share

    340.9     298.1     291.1  
   
(1)
Includes 7.6 million, 6.1 million and 6.9 million shares of participating securities for the years ended December 31, 2011, 2010, and 2009 respectively.

        Certain potentially issuable common shares, primarily related to stock options, were not included in the computation of diluted net income per share because their inclusion would have been antidilutive. The number of shares excluded from the calculation was 0.1 million in 2011 and 4.8 million in both 2010 and 2009.

Dividends

        During 2011, 2010, and 2009, Aon paid dividends on its common stock of $200 million, $175 million, and $165 million, respectively. Dividends paid per common share were $0.60 for each of the years ended December 31, 2011, 2010, and 2009.

Other Comprehensive Loss

        The components of other comprehensive loss and the related tax effects are as follows (in millions):

Year ended December 31, 2011
  Pretax
  Income Tax
Benefit
(Expense)

  Net
of Tax

 
   

Net derivative losses arising during the year

  $ (44 ) $ 15   $ (29 )

Reclassification adjustment

    25     (9 )   16  
   

Net change in derivative losses

    (19 )   6     (13 )

Net foreign exchange translation adjustments

   
(46

)
 
3
   
(43

)

Net post-retirement benefit obligation

    (593 )   197     (396 )
   

Total other comprehensive loss

    (658 )   206     (452 )

Less: other comprehensive income attributable to noncontrolling interest

    1         1  
   

Other comprehensive loss attributable to Aon stockholders

  $ (659 ) $ 206   $ (453 )
   


 

Year ended December 31, 2010
  Pretax
  Income Tax
Benefit
(Expense)

  Net
of Tax

 
   

Net derivative losses arising during the year

  $ (31 ) $ 10   $ (21 )

Reclassification adjustment

    (5 )   2     (3 )
   

Net change in derivative losses

    (36 )   12     (24 )

Net foreign exchange translation adjustments

    (92 )   (43 )   (135 )

Net post-retirement benefit obligation

    (76 )   35     (41 )
   

Total other comprehensive loss

    (204 )   4     (200 )

Less: other comprehensive loss attributable to noncontrolling interests

    (2 )       (2 )
   

Other comprehensive loss attributable to Aon stockholders

  $ (202 ) $ 4   $ (198 )
   


 

Year ended December 31, 2009
  Pretax
  Income Tax
Benefit
(Expense)

  Net
of Tax

 
   

Net derivative gains arising during the year

  $ 11   $ (4 ) $ 7  

Reclassification adjustment

    10     (4 )   6  
   

Net change in derivative gains

    21     (8 )   13  

Decrease in unrealized gains/losses

    (17 )   6     (11 )

Reclassification adjustment

    (2 )   1     (1 )
   

Net change in unrealized investment losses

    (19 )   7     (12 )

Net foreign exchange translation adjustments

    198     5     203  

Net post-retirement benefit obligations

    (583 )   170     (413 )
   

Total other comprehensive loss

    (383 )   174     (209 )

Less: other comprehensive income attributable to noncontrolling interests

    4         4  
   

Other comprehensive loss attributable to Aon stockholders

  $ (387 ) $ 174   $ (213 )
   

        The components of accumulated other comprehensive loss, net of related tax, are as follows (in millions):

As of December 31
  2011
  2010
  2009
 
   

Net derivative losses

  $ (37 ) $ (24 ) $  

Net unrealized investment gains (1)

            44  

Net foreign exchange translation adjustments

    124     168     301  

Net postretirement benefit obligations

    (2,457 )   (2,061 )   (2,020 )
   

Accumulated other comprehensive loss, net of tax

  $ (2,370 ) $ (1,917 ) $ (1,675 )
   
(1)
Reflects the impact of adopting new accounting guidance which resulted in the consolidation of PEPS I effective January 1, 2010.

        The pretax changes in net unrealized investment losses, which include investments reported as available for sale, are as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Fixed maturities

  $   $   $ (3 )

Other investments

            (16 )
   

Total

  $   $   $ (19 )
   

        The components of net unrealized investment gains, which include investments reported as available for sale, are as follows (in millions):

As of December 31
  2011
  2010
  2009
 
   

Other investments

  $   $   $ 69  

Deferred taxes

            (25 )
   

Net unrealized investment gains

  $   $   $ 44  
   
Employee Benefits
Employee Benefits

12.  Employee Benefits

Defined Contribution Savings Plans

        Aon maintains defined contribution savings plans for the benefit of its U.S. and U.K. employees. The expense recognized for these plans is included in Compensation and benefits in the Consolidated Statements of Income, as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

U.S.

  $ 104   $ 65   $ 56  

U.K.

    43     35     38  
   

 

  $ 147   $ 100   $ 94  
   

Pension and Other Post-retirement Benefits

        Aon sponsors defined benefit pension and post-retirement health and welfare plans that provide retirement, medical, and life insurance benefits. The post-retirement healthcare plans are contributory, with retiree contributions adjusted annually, and the life insurance and pension plans are noncontributory.

        The majority of the Company's plans are closed to new entrants. Effective April 1, 2009, the Company ceased crediting future benefits relating to salary and service in its U.S. defined benefit pension plan. This change affected approximately 6,000 active employees covered by the U.S. plan. For those employees, the Company increased its contribution to the defined contribution savings plan. In 2010, the Company ceased crediting future benefits relating to service in its Canadian defined benefit pension plans. This change affected approximately 950 active employees.

Pension Plans

        The following tables provide a reconciliation of the changes in the projected benefit obligations and fair value of assets for the years ended December 31, 2011 and 2010 and a statement of the funded status as of December 31, 2011 and 2010, for the U.S. plans and material international plans, which are located in the U.K., the Netherlands, and Canada. These plans represent approximately 94% of the Company's projected benefit obligations.

        At December 31, 2010, in accordance with changes to applicable United Kingdom statutes, pensions in deferment will be revalued annually based on the Consumer Prices Index, as opposed to the Retail Prices Index which was previously used. The impact on the projected benefit obligation was a gain that was recorded in Accumulated other comprehensive loss of $124 million and is included in the actuarial gain for 2010.

 
  U.S.   International  
(millions)
  2011
  2010
  2011
  2010
 
   

Change in projected benefit obligation

                         

At January 1

  $ 2,376   $ 2,139   $ 4,812   $ 4,500  

Service cost

            19     15  

Interest cost

    122     124     267     249  

Participant contributions

            1     1  

Plan amendment

            12      

Plan transfer and acquisitions

            17     203  

Actuarial loss (gain)

    51     34     (32 )   (101 )

Benefit payments

    (115 )   (111 )   (181 )   (183 )

Change in discount rate

    223     190     651     260  

Foreign currency revaluation

            17     (132 )
   

At December 31

  $ 2,657   $ 2,376   $ 5,583   $ 4,812  
   

Accumulated benefit obligation at end of year

  $ 2,657   $ 2,376   $ 5,508   $ 4,737  
   

Change in fair value of plan assets

                         

At January 1

  $ 1,244   $ 1,153   $ 4,288   $ 3,753  

Actual return on plan assets

    83     175     595     403  

Participant contributions

            1     1  

Employer contributions

    113     27     364     261  

Plan transfer and acquisitions

            13     192  

Benefit payments

    (115 )   (111 )   (181 )   (183 )

Foreign currency revaluation

            18     (139 )
   

At December 31

  $ 1,325   $ 1,244   $ 5,098   $ 4,288  
   

Market related value at end of year

  $ 1,410   $ 1,380   $ 5,098   $ 4,288  
   

Amount recognized in Statement of Financial Position at December 31

                         

Funded status

  $ (1,332 ) $ (1,132 ) $ (485 ) $ (524 )

Unrecognized prior-service cost

            28     17  

Unrecognized loss

    1,480     1,200     2,109     1,836  
   

Net amount recognized

  $ 148   $ 68   $ 1,652   $ 1,329  
   

        Amounts recognized in the Consolidated Statements of Financial Position consist of (in millions):

 
  U.S.   International  
 
  2011
  2010
  2011
  2010
 
   

Prepaid benefit cost (included in Other non-current assets)

  $   $   $ 159   $ 59  

Accrued benefit liability (included in Pension, other post retirement, and post employment liabilities)

    (1,332 )   (1,132 )   (644 )   (583 )

Accumulated other comprehensive loss

    1,480     1,200     2,137     1,853  
   

Net amount recognized

    148     68     1,652     1,329  
   

        Amounts recognized in Accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at December 31, 2011 and 2010 consist of (in millions):

 
  U.S.   International  
 
  2011
  2010
  2011
  2010
 
   

Net loss

  $ 1,480   $ 1,200   $ 2,109   $ 1,836  

Prior service cost

            28     17  
   

 

  $ 1,480   $ 1,200   $ 2,137   $ 1,853  
   

        In 2011, U.S. plans with a projected benefit obligation ("PBO") and an accumulated benefit obligation ("ABO") in excess of the fair value of plan assets had a PBO of $2.7 billion, an ABO of $2.7 billion, and plan assets of $1.3 billion. International plans with a PBO in excess of the fair value of plan assets had a PBO of $3.1 billion and plan assets with a fair value of $2.5 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $3.0 billion and plan assets with a fair value of $2.4 billion.

        In 2010, U.S. plans with a PBO and an ABO in excess of the fair value of plan assets had a PBO of $2.4 billion, an ABO of $2.4 billion, and plan assets of $1.2 billion. International plans with a PBO in excess of the fair value of plan assets had a PBO of $2.7 billion and plan assets with a fair value of $2.3 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $2.1 billion and plan assets with a fair value of $1.6 billion.

        The following table provides the components of net periodic benefit cost for the plans (in millions):

 
  U.S.   International  
 
  2011
  2010
  2009
  2011
  2010
  2009
 
   

Service cost

  $   $   $   $ 19   $ 15   $ 18  

Interest cost

    122     124     125     267     249     236  

Expected return on plan assets

    (120 )   (118 )   (102 )   (287 )   (240 )   (234 )

Amortization of prior-service cost

            (1 )   1     1      

Amortization of net actuarial loss

    31     24     28     53     54     41  
       

Net periodic benefit cost

  $ 33   $ 30   $ 50   $ 53   $ 79   $ 61  
   

        In addition to the net periodic benefit cost shown above in 2010, the Company recorded a non-cash charge of $49 million ($29 million after-tax) with a corresponding credit to Accumulated other comprehensive income. This charge is included in Compensation and benefits in the Consolidated Statements of Income and represents the correction of an error in the calculation of pension expense for the Company's U.S. pension plan for the period from 1999 to the end of the first quarter of 2010.

        In 2009, a curtailment gain of $83 million was recognized as a result of the Company ceasing crediting future benefits relating to salary and service of the U.S. defined benefit pension plan. Also in 2009, Aon recorded a $5 million curtailment charge attributable to a remeasurement resulting from the decision to cease service accruals for the Canadian plans beginning in 2010. These items are reported in Compensation and benefits in the Consolidated Statements of Income.

        In 2009, a curtailment gain of $10 million was recognized in discontinued operations resulting from the sale of Combined Insurance Company of America ("CICA"). The curtailment gain relates to the Company's U.S. Retiree Health and Welfare Plan, in which CICA employees were allowed to participate through the end of 2008, pursuant to the terms of the sale.

        The weighted-average assumptions used to determine future benefit obligations are as follows:

 
  U.S.   International  
 
  2011
  2010
  2011
  2010
 
   

Discount rate

    4.33 – 4.60 %   4.35 – 5.34 %   4.40 – 4.94 %   4.70 – 5.50 %

Rate of compensation increase

    N/A     N/A     2.25 – 3.55 %   2.50 – 4.00 %

        The weighted-average assumptions used to determine the net periodic benefit cost are as follows:

 
  U.S.   International  
 
  2011
  2010
  2009
  2011
  2010
  2009
 
   

Discount rate

    4.35 – 5.34 %   5.22% – 5.98 %   6.00 – 7.08 %   4.70 – 5.50 %   4.00 – 6.19 %   5.62 – 7.42 %

Expected return on plan assets

    8.80     8.80     8.70     3.20 – 7.20     4.70 – 7.00     5.48 – 7.00  

Rate of compensation increase

    N/A     N/A     N/A     2.00 – 4.00     2.50 – 3.60     3.25 – 3.50  

        The amounts in Accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during 2012 are $43 million in the United States and $60 million internationally.

Expected Return on Plan Assets

        To determine the expected long-term rate of return on plan assets, the historical performance, investment community forecasts and current market conditions are analyzed to develop expected returns for each asset class used by the plans. The expected returns for each asset class are weighted by the target allocations of the plans. The expected return on plan assets in the U.S. of 8.80% reflects a portfolio that is seeking asset growth through a higher equity allocation while maintaining prudent risk levels.  The portfolio contains certain assets that have historically resulted in higher returns and other instruments to minimize downside risk.

        No plan assets are expected to be returned to the Company during 2012.

Fair value of plan assets

        The Company determined the fair value of plan assets through numerous procedures based on the asset class and available information. See Note 15 "Fair Value Measurements and Financial Instruments" for a description of the procedures performed to determine the fair value of the plan assets. The fair values of Aon's U.S. pension plan assets at December 31, 2011 and December 31, 2010, by asset category, are as follows (in millions):

 
   
  Fair Value Measurements Using  
Asset Category
  Balance at
December 31,
2011

  Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

  Significant
Other
Observable
Inputs
(Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Cash and cash equivalents (1)

  $ 22   $ 22   $   $  

Equity investments: (2)

                         

Large cap domestic

    151     151          

Small cap domestic

    58         58      

Large cap international

    97     9     88      

Equity derivatives

    173     63     110      

Fixed income investments: (3)

                         

Corporate bonds

    355         355      

Government and agency bonds

    116         116      

Asset-backed securities

    18         18      

Fixed income derivatives

    83         83      

Other investments:

                         

Alternative investments (4)

    191             191  

Commodity derivatives (5)

    19         19      

Real estate and REITS (6)

    42     42          
       

Total

  $ 1,325   $ 287   $ 847   $ 191  
   
(1)
Consists of cash and institutional short-term investment funds.

(2)
Consists of equity securities, equity derivatives, and pooled equity funds.

(3)
Consists of corporate and government bonds, asset-backed securities, and fixed income derivatives.

(4)
Consists of limited partnerships, private equity and hedge funds.

(5)
Consists of long-dated options on a commodity index.

(6)
Consists of exchange traded REITS.

 
   
  Fair Value Measurements Using  
Asset Category
  Balance at
December 31,
2010

  Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

  Significant
Other
Observable
Inputs
(Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Highly liquid debt instruments (1)

  $ 27   $ 1   $ 26   $  

Equity investments: (2)

                         

Large cap domestic

    247     247          

Small cap domestic

    22         22      

Large cap international

    11     11          

Small cap global

                 

Equity derivatives

    231         231      

Fixed income investments: (3)

                         

Corporate bonds

    395         395      

Government and agency bonds

    50         50      

Asset-backed securities

    5         5      

Fixed income derivatives

    6         6      

Other investments:

                         

Alternative investments (4)

    193             193  

Commodity derivatives (5)

    18         18      

Real estate and REITS (6)

    39     39          
       

Total

  $ 1,244   $ 298   $ 753   $ 193  
   
(1)
Consists of cash and institutional short-term investment funds.

(2)
Consists of equity securities and equity derivatives.

(3)
Consists of corporate and government bonds, asset-backed securities, and fixed income derivatives.

(4)
Consists of limited partnerships, private equity and hedge funds.

(5)
Consists of long-dated options on a commodity index.

(6)
Consists of exchange traded REITS.

        The following table presents the changes in the Level 3 fair-value category for the years ended December 31, 2011 and December 31, 2010 (in millions):

 
  Fair Value
Measurement
Using
Level 3
Inputs

 
   

Balance at January 1, 2010

  $ 138  

Actual return on plan assets:

       

Relating to assets still held at December 31, 2010

    1  

Relating to assets sold during 2010

    8  

Purchases, sales and settlements

    35  

Transfer in/(out) of level 3

    11  
       

Balance at December 31, 2010

    193  

Actual return on plan assets:

       

Relating to assets still held at December 31, 2011

    (8 )

Relating to assets sold during 2011

    1  

Purchases, sales and settlements

    5  

Transfer in/(out) of Level 3

     
       

Balance at December 31, 2011

  $ 191  
   

        The fair values of Aon's major international pension plan assets at December 31, 2011 and December 31, 2010, by asset category, are as follows (in millions):

 
   
  Fair Value Measurements Using  
 
  Balance at
December 31,
2011

  Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

  Significant
Other
Observable
Inputs
(Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Cash & cash equivalents

  $ 276   $ 276   $   $  

Equity investments:

                         

Pooled funds: (1)

                         

Global

    960         960      

Europe

    347         347      

North America

    56         56      

Equity securities — global (2)

    128     128          

Derivatives (2)

    11         11      

Fixed income investments:

                         

Pooled funds (1)

                         

Fixed income securities

    823         823      

Derivatives

    21         21      

Fixed income securities (3)

    1,355     1,299     56      

Annuities

    419             419  

Derivatives (3)

    178         178      

Other investments:

                         

Pooled funds: (1)

                         

Commodities

    26         26      

REITS

    4         4      

Real estate (4)

    134             134  

Derivatives

    14         14      

Alternative investments (5)

    346             346  
       

Total

  $ 5,098   $ 1,703   $ 2,496   $ 899  
   
(1)
Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.

(2)
Consists of equity securities and equity derivatives.

(3)
Consists of corporate and government bonds and fixed income derivatives.

(4)
Consists of property funds and trusts holding direct real estate investments.

(5)
Consists of limited partnerships, private equity and hedge funds.

 
   
  Fair Value Measurements Using  
Asset Category
  Balance at
December 31,
2010

  Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

  Significant
Other
Observable
Inputs
(Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Cash & cash equivalents

  $ 54   $ 54   $   $  

Equity investments:

                         

Pooled funds: (1)

                         

Global

    823         661     162  

Europe

    574         574      

North America

    133         133      

Asia Pacific

    67         67      

Other equity securities — global (2)

    129     121     8      

Fixed income investments:

                         

Pooled funds (1)

    947         907     40  

Fixed income securities (3)

    805         805      

Annuities

    380             380  

Derivatives (3)

    (28 )       (28 )    

Other investments:

                         

Pooled Funds: (1)

                         

Commodities

    34         34      

REITS

    8         8      

Real estate (4)

    127             127  

Alternative investments (5)

    235         17     218  
       

Total

  $ 4,288   $ 175   $ 3,186   $ 927  
   
(1)
Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.

(2)
Consists of equity securities and equity derivatives.

(3)
Consists of corporate and government bonds and fixed income derivatives.

(4)
Consists of property funds and trusts holding direct real estate investments.

(5)
Consists of limited partnerships, private equity and hedge funds.

        The following table presents the changes in the Level 3 fair-value category for the years ended December 31, 2011 and December 31, 2010 (in millions):

 
  Fair Value Measurements Using Level 3 Inputs  
 
  Global
  Fixed
  Annuities
  Real
Estate

  Alternative
Investments

  Total
 
   

Balance at January 1, 2010

  $ 145   $   $ 432   $ 136   $ 33   $ 746  

Actual return on plan assets:

                                     

Relating to assets still held at December 31, 2010

    20     2     (38 )   9     7      

Relating to assets sold during 2010

    2                 2     4  

Purchases, sales and settlements

    10     38         (12 )   176     212  

Foreign Exchange

    (15 )       (14 )   (6 )       (35 )
       

Balance at December 31, 2010

    162     40     380     127     218     927  

Actual return on plan assets:

                                     

Relating to assets still held at December 31, 2011

            35     3         38  

Relating to assets sold during 2011

                    1     1  

Purchases, sales and settlements

                2     86     88  

Transfers in/(out) of Level 3 (1)

    (162 )   (40 )       1     41     (160 )

Foreign Exchange

            4     1         5  
       

Balance at December 31, 2011

  $   $   $ 419   $ 134   $ 346   $ 899  
   
(1)
During 2011, a pooled global equity fund with a fair value of $162 million was transferred from Level 3 to Level 2 due to increased observability of the inputs. Additionally, a fund of funds with a fair value of $40 million was reclassified within Level 3 to be consistent with other similar fund of funds classified as Alternative Investments within the fair value hierarchy.

Investment Policy and Strategy

        The U.S. investment policy, as established by the Aon Retirement Plan Governance and Investment Committee ("RPGIC"), seeks reasonable asset growth at prudent risk levels within target allocations, which are 49% equity investments, 30% fixed income investments, and 21% other investments. Aon believes that plan assets are well-diversified and are of appropriate quality. The investment portfolio asset allocation is reviewed quarterly and re-balanced to be within policy target allocations. The investment policy is reviewed at least annually and revised, as deemed appropriate by the RPGIC. The investment policies for international plans are generally established by the local pension plan trustees and seek to maintain the plans' ability to meet liabilities and to comply with local minimum funding requirements. Plan assets are invested in diversified portfolios that provide adequate levels of return at an acceptable level of risk. The investment policies are reviewed at least annually and revised, as deemed appropriate to ensure that the objectives are being met. At December 31, 2011, the weighted average targeted allocation for the international plans was 43% for equity investments and 57% for fixed income investments.

Cash Flows

Contributions

        Based on current assumptions, Aon expects to contribute approximately $237 million and $304 million, respectively, to its U.S. and international pension plans during 2012.

Estimated Future Benefit Payments

        Estimated future benefit payments for plans are as follows at December 31, 2011 (in millions):

 
  U.S.
  International
 
   

2012

  $ 137   $ 164  

2013

    147     172  

2014

    142     180  

2015

    148     187  

2016

    146     198  

2017 – 2021

    753     990  

U.S. and Canadian Other Post-Retirement Benefits

        The following table provides an overview of the accumulated projected benefit obligation, fair value of plan assets, funded status and net amount recognized as of December 31, 2011 and 2010 for the Company's other post-retirement benefit plans located in the U.S. and Canada (in millions):

 
  2011
  2010
 
   

Accumulated projected benefit obligation

  $ 134   $ 119  

Fair value of plan assets

    20     22  
       

Funded status

    (114 )   (97 )
       

Unrecognized prior-service credit

    (8 )   (11 )

Unrecognized loss

    25     9  
       

Net amount recognized

  $ (97 ) $ (99 )
   

        Other information related to the Company's other post-retirement benefit plans are as follows:

 
  2011
  2010
  2009
 
   

Net periodic benefit cost recognized (millions)

  $ 6   $ 4   $ 4  

Weighted-average discount rate used to determine future benefit obligations

    4.33 – 5.00 %   4.92 – 6.00 %   5.90 – 6.19 %

Weighted-average discount rate used to determine net periodic benefit costs

    4.92 – 6.00 %   5.90 – 6.19 %   6.22 – 7.50 %

        Amounts recognized in Accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at December 31, 2011 are $25 million and $8 million of net loss and prior service credit, respectively. The amount in accumulated other comprehensive income expected to be recognized as a component of net periodic benefit cost during 2012 is $2 million and $3 million of net loss and prior service credit, respectively.

        Based on current assumptions, Aon expects:

  • To contribute $7 million to fund material other post-retirement benefit plans during 2012.

    Estimated future benefit payments will be approximately $9 million each year for 2012 through 2016, and $49 million in aggregate for 2017-2021.

        The accumulated post-retirement benefit obligation is increased by $5 million and decreased by $4 million by a respective 1% increase or decrease to the assumed health care trend rate. The service cost and interest cost components of net periodic benefits cost is increased by $1 million and decreased by $1 million by a respective 1% increase or decrease to the assumed healthcare trend rate.

        For most of the participants in the U.S. plan, Aon's liability for future plan cost increases for pre-65 and Medical Supplement plan coverage is limited to 5% per annum. Because of this cap, net employer trend rates for these plans are effectively limited to 5% per year in the future. During 2007, Aon recognized a plan amendment that phases out post-65 retiree coverage in its U.S. plan over the next three years. The impact of this amendment on net periodic benefit cost is being recognized over the average remaining service life of the employees.

Stock Compensation Plans
Stock Compensation Plans

13.  Stock Compensation Plans

        The following table summarizes share-based compensation expense recognized in continuing operations in Compensation and benefits in the Consolidated Statements of Income (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Restricted Stock Units ("RSUs")

  $ 142   $ 138   $ 124  

Performance Share Awards ("PSAs")

    78     62     60  

Stock options

    9     17     21  

Employee stock purchase plans

    6     4     4  
       

Total stock-based compensation expense

    235     221     209  

Tax benefit

    77     75     68  
       

Stock-based compensation expense, net of tax

  $ 158   $ 146   $ 141  
   

        During 2009, the Company converted its stock administration system to a new service provider. In connection with this conversion, a reconciliation of the methodologies and estimates used was performed, which resulted in a $12 million reduction of expense for the year ended December 31, 2009.

Restricted Stock Units

        RSUs generally vest between three and five years, but may vest up to ten years from the date of grant. The fair value of RSUs is based upon the market value of the Aon common stock at the date of grant. With certain limited exceptions, any break in continuous employment will cause the forfeiture of all unvested awards. Compensation expense associated with RSUs is recognized over the service period. Dividend equivalents are paid on certain RSUs, based on the initial grant amount.

        A summary of the status of Aon's RSUs is as follows (shares in thousands):

 
  2011   2010   2009  
Years ended December 31
  Shares
  Fair
Value (1)

  Shares
  Fair
Value (1)

  Shares
  Fair
Value (1)

 
   

Non-vested at beginning of year

    10,674   $ 38     12,850   $ 36     14,060   $ 35  

Granted

    3,506     51     3,817     40     3,786     38  

Vested

    (3,773 )   39     (5,278 )   35     (4,330 )   33  

Forfeited

    (491 )   39     (715 )   35     (666 )   37  
       

Non-vested at end of year

    9,916     42     10,674     38     12,850     36  
   
(1)
Represents per share weighted average fair value of award at date of grant.

        The fair value of awards that vested during 2011, 2010 and 2009 was $217 million, $235 million and $223 million, respectively.

Performance Share Awards

        The vesting of PSAs is contingent upon meeting various individual, divisional or company-wide performance conditions, including revenue generation or growth in revenue, pretax income or earnings per share over a one- to five-year period. The performance conditions are not considered in the determination of the grant date fair value for these awards. The fair value of PSAs is based upon the market price of the Aon common stock at the date of grant. Compensation expense is recognized over the performance period, and in certain cases an additional vesting period, based on management's estimate of the number of units expected to vest. Compensation expense is adjusted to reflect the actual number of shares issued at the end of the programs. The actual issuance of shares may range from 0-200% of the target number of PSAs granted, based on the plan. Dividend equivalents are not paid on PSAs.

        Information regarding PSAs granted during the years ended December 31, 2011, 2010 and 2009 follows (shares in thousands, dollars in millions, except fair value):

 
  2011
  2010
  2009
 
   

Target PSUs granted

    1,715     1,390     3,754  

Fair Value (1)

  $ 50   $ 39   $ 38  

Number of shares that would be issued based on current performance levels

    1,772     1,397     2,300  

Unamortized expense, based on current performance levels

  $ 60   $ 18   $ 4  
   
(1)
Represents per share weighted average fair value of award at date of grant.

        During 2011, the Company issued approximately 1.2 million shares in connection with the 2008 Leadership Performance Plan ("LPP") cycle and 0.3 million shares related to a 2006 performance plan. During 2010, the Company issued approximately 1.6 million shares in connection with the completion of the 2007 LPP cycle and 84,000 shares related to other performance plans.

Stock Options

        Options to purchase common stock are granted to certain employees at fair value on the date of grant. Commencing in 2010, the Company ceased granting new stock options with the exception of historical contractual commitments. Generally, employees are required to complete two continuous years of service before the options begin to vest in increments until the completion of a 4-year period of continuous employment, although a number of options were granted that require five continuous years of service before the options are fully vested. Options issued under the LPP program vest ratable over 3 years with a six year term. The maximum contractual term on stock options is generally ten years from the date of grant.

        Aon uses a lattice-binomial option-pricing model to value stock options. Lattice-based option valuation models use a range of assumptions over the expected term of the options. Expected volatilities are based on the average of the historical volatility of Aon's stock price and the implied volatility of traded options and Aon's stock. The valuation model stratifies employees between those receiving LPP options, Special Stock Plan ("SSP") options, and all other option grants. The Company believes that this stratification better represents prospective stock option exercise patterns. The expected dividend yield assumption is based on the Company's historical and expected future dividend rate. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of employee stock options represents the weighted-average period stock options are expected to remain outstanding and is a derived output of the lattice-binomial model.

        The weighted average assumptions, the weighted average expected life and estimated fair value of employee stock options are summarized as follows:

Years ended December 31
  2011
  2010
  2009
 
   
 
  All Other
Options

  All Other
Options

  LPP
Options

  SSP
Options

  All Other
Options

 
   

Weighted average volatility

    26.1 %   28.5 %   35.5 %   34.1 %   32.0 %

Expected dividend yield

    1.3 %   1.6 %   1.3 %   1.5 %   1.5 %

Risk-free rate

    2.2 %   3.0 %   1.5 %   2.0 %   2.6 %
   

Weighted average expected life, in years

   
5.5
   
6.1
   
4.4
   
5.6
   
6.5
 

Weighted average estimated fair value per share

  $ 10.92   $ 10.37   $ 12.19   $ 11.82   $ 12.34  
   

        In connection with the LPP Plan, the Company granted the following number of stock options at the noted exercise price: 2011 — none, 2010 — none, and 2009 — 1 million shares at $39 per share. In connection with its incentive compensation plans, the Company granted the following number of stock options at the noted exercise price: 2011 — 80,000 shares at $53 per share, 2010 — 143,000 shares at $38 per share, and 2009 — 550,000 shares at $37 per share. In 2010, the Company acquired Hewitt Associates and immediately vested all outstanding options issued under Hewitt's Global Stock and Incentive Compensation Plan.

        Each outstanding vested Hewitt stock option was converted into a fully vested and exercisable option to purchase Aon Common Stock with the same terms and conditions as the Hewitt stock option. On the acquisition date, 4.5 million options to purchase Aon Common Stock were issued to former holders of Hewitt stock options and 1.2 million of these options remain outstanding and exercisable at December 31, 2011.

        A summary of the status of Aon's stock options and related information is as follows (shares in thousands):

Years ended December 31
  2011
  2010
  2009
 
   
 
  Shares
  Weighted-
Average
Exercise
Price Per
Share

  Shares
  Weighted-
Average
Exercise
Price Per
Share

  Shares
  Weighted-
Average
Exercise
Price Per
Share

 
   

Beginning outstanding

    13,919   $ 32     15,937   $ 33     19,666   $ 31  

Options issued in connection with the Hewitt acquisition

            4,545     22          

Granted

    80     53     143     38     1,551     38  

Exercised

    (4,546 )   32     (6,197 )   27     (4,475 )   27  

Forfeited and expired

    (337 )   36     (509 )   35     (805 )   38  
   

Outstanding at end of year

    9,116     32     13,919     32     15,937     33  
   

Exercisable at end of year

    7,833     30     11,293     30     9,884     31  
   

Shares available for grant

    24,508           22,777           8,257        
   

        A summary of options outstanding and exercisable as of December 31, 2011 is as follows (shares in thousands):

 
  Options Outstanding   Options Exercisable  
Range of Exercise Prices
  Shares
Outstanding

  Weighted-
Average
Remaining
Contractual
Life (years)

  Weighted-
Average
Exercise Price
Per Share

  Shares
Exercisable

  Weighted-
Average
Remaining
Contractual
Life (years)

  Weighted-
Average
Exercise Price
Per Share

 
   

$14.71 – 22.86

    2,718     2.66   $ 20.95     2,718     2.66   $ 20.95  

  22.87 – 25.51

    663     3.40     25.37     663     3.40     25.37  

  25.52 – 32.53

    1,069     2.95     27.53     1,069     2.95     27.53  

  32.54 – 36.88

    1,277     2.96     36.05     1,037     2.41     35.96  

  36.89 – 43.44

    2,309     3.04     39.72     1,757     2.35     39.92  

  43.45 – 52.93

    1,080     4.49     46.24     589     4.09     45.52  
   

 

    9,116                 7,833              
   

        The aggregate intrinsic value represents the total pretax intrinsic value, based on options with an exercise price less than the Company's closing stock price of $46.80 as of December 31, 2011, which would have been received by the option holders had those option holders exercised their options as of that date. At December 31, 2011, the aggregate intrinsic value of options outstanding was $136 million, of which $129 million was exercisable.

        Other information related to the Company's stock options is as follows (in millions):

 
  2011
  2010
  2009
 
   

Aggregate intrinsic value of stock options exercised

  $ 80   $ 87   $ 62  

Cash received from the exercise of stock options

    153     162     121  

Tax benefit realized from the exercise of stock options

    14     4     15  
   

        Unamortized deferred compensation expense, which includes both options and awards, amounted to $263 million as of December 31, 2011, with a remaining weighted-average amortization period of approximately 2.0 years.

Employee Stock Purchase Plan

United States

        Aon has an employee stock purchase plan that provides for the purchase of a maximum of 7.5 million shares of Aon's common stock by eligible U.S. employees. Prior to 2011, shares of Aon's common stock were purchased at 3-month intervals at 85% of the lower of the fair market value of the common stock on the first or the last day of each 3-month period. Beginning in 2011, shares of Aon's common stock were purchased at 6-month intervals at 85% of the lower of the fair market value of the common stock on the first or last day of each 6-month period. In 2011, 2010, and 2009, 468,000 shares, 357,000 shares and 323,000 shares, respectively, were issued to employees under the plan. Compensation expense recognized was $5 million in 2011, and $3 million each in 2010 and 2009.

United Kingdom

        Aon also has an employee stock purchase plan for eligible U.K. employees that provides for the purchase of shares after a 3-year period and that is similar to the U.S. plan previously described. Three-year periods began in 2008 and 2006, allowing for the purchase of a maximum of 200,000 and 525,000 shares, respectively. In 2011, 2010 and 2009, 63,000 shares, 5,000 shares, and 201,000 shares, respectively, were issued under the plan. In 2011, 2010 and 2009, $1 million, $1 million, and $1 million, respectively, of compensation expense was recognized.

Derivatives and Hedging
Derivatives and Hedging

14.  Derivatives and Hedging

        Aon is exposed to certain market risks, including changes in foreign currency exchange rates and interest rates. To manage the risk related to these exposures, Aon enters into various derivative instruments that reduce these market risks by creating offsetting exposures. Aon does not enter into derivative instruments for trading or speculative purposes.

        Derivative transactions are governed by a uniform set of policies and procedures covering areas such as authorization, counterparty exposure and hedging practices. Positions are monitored using techniques such as market value and sensitivity analyses.

        Certain derivatives also give rise to credit risks from the possible non-performance by counterparties. The credit risk is generally limited to the fair value of those contracts that are favorable to Aon. Aon has limited its credit risk by using International Swaps and Derivatives Association ("ISDA") master agreements, collateral and credit support arrangements, entering into non-exchange-traded derivatives with highly-rated major financial institutions and by using exchange-traded instruments. Aon monitors the credit-worthiness of, and exposure to, its counterparties. As of December 31, 2011, all net derivative positions were free of credit risk contingent features. In addition, Aon has not received nor pledged collateral to counterparties for derivatives subject to collateral support arrangements as of December 31, 2011.

Foreign Exchange Risk Management

        Aon and its subsidiaries are exposed to foreign exchange risk when they receive revenues, pay expenses, or enter into intercompany loans denominated in a currency that differs from their functional currency. Aon uses foreign exchange derivatives, typically forward contracts, options and cross currency swaps, to reduce its overall exposure to the effects of currency fluctuations on cash flows. These exposures are hedged, on average, for less than two years; however, in limited instances, the Company has hedged certain exposures up to five years in the future. As of December 31, 2011, $43 million of pretax losses have been deferred in OCI related to foreign currency hedges, of which a $30 million loss is expected to be reclassified to earnings in 2012. These hedging relationships had no material ineffectiveness in 2011, 2010, or 2009.

        Aon also uses foreign exchange derivatives, typically forward contracts and options, to hedge its net investments in foreign operations for up to two years in the future. As of December 31, 2011, $109 million of gains have been deferred in OCI related to the existing hedge of a net investment in a foreign operation. This hedge had no material ineffectiveness in 2011, 2010, or 2009.

        Aon also uses foreign exchange derivatives, typically forward contracts and options, to manage the currency exposure of Aon's global liquidity profile for one year in the future. These derivatives are not accounted for as hedges, and changes in fair value are recorded each period in Other general expenses in the Consolidated Statements of Income.

Interest Rate Risk Management

        Aon holds variable-rate short-term brokerage and other operating deposits. Aon uses interest rate derivatives, typically swaps, to reduce its exposure to the effects of interest rate fluctuations on the forecasted interest receipts from these deposits for up to two years in the future. As of December 31, 2011, $1 million of pretax gains have been deferred in OCI related to these hedging relationships, all of which is expected to be reclassified to earnings in 2012. These hedges had no material ineffectiveness in 2011, 2010, or 2009.

        In August 2010, Aon entered into forward starting swaps with a total notional of $500 million to reduce its exposure to the effects of interest rate fluctuations on the forecasted interest expense cash flows related to the anticipated issuance of fixed rate debt in September 2010. Aon designated the forward starting swaps as a cash flow hedge of this exposure and terminated the positions when the debt was issued. As of December 31, 2011, $12 million of pretax losses have been deferred in OCI related to these hedges, of which $1 million is expected to be reclassified to earnings during the next twelve months. These hedges had no material ineffectiveness in 2011 and 2010.

        In 2009, a subsidiary of Aon issued €500 million ($655 million at December 31, 2011 exchange rates) of fixed rate debt due on July 1, 2014. Aon is exposed to changes in the fair value of the debt due to interest rate fluctuations. Aon entered into interest rate swaps, which were designated as part of a fair value hedging relationship to reduce its exposure to the effects of interest rate fluctuations on the fair value of the debt. This hedge did not have any material ineffectiveness in 2011, 2010, and 2009.

        The notional and fair values of derivative instruments are as follows (in millions):

 
   
   
  Derivative Assets (1)   Derivative Liabilities (2)  
 
  Notional Amount   Fair Value   Fair Value  
As of December 31
  2011
  2010
  2011
  2010
  2011
  2010
 
   

Derivatives accounted for as hedges:

                                     

Interest rate contracts

  $ 702   $ 826   $ 16   $ 15   $   $  

Foreign exchange contracts

    1,297     1,544     140     157     188     157  
       

Total

    1,999     2,370     156     172     188     157  

Derivatives not accounted for as hedges:

                                     

Foreign exchange contracts

    246     238     1     2     1     1  
       

Total

  $ 2,245   $ 2,608   $ 157   $ 174   $ 189   $ 158  
   
(1)
Included within other assets in the Consolidated Statements of Financial Position.

(2)
Included within other liabilities in the Consolidated Statements of Financial Position.

        The amounts of derivative gains (losses) recognized in the Consolidated Financial Statements are as follows (in millions):

 
  December 31,  
Gain (Loss) recognized in Accumulated Other Comprehensive Loss:
  2011
  2010
 
   

Cash flow hedges:

             

Interest rate contracts

  $ (1 ) $ (10 )

Foreign exchange contracts

    (54 )   (145 )
       

Total

    (55 )   (155 )
       

Foreign net investment hedges:

             

Foreign exchange contracts

  $ (2 ) $ 111  
   

Gain (Loss) reclassified from Accumulated Other Comprehensive
Loss into Income (Effective Portion):


 

 


 

 


 
   

Cash flow hedges:

             

Interest rate contracts (1)

  $   $ 16  

Foreign exchange contracts (2)

    (36 )   (134 )
       

Total

    (36 )   (118 )
       

Foreign net investment hedges:

             

Foreign exchange contracts

  $   $  
   

        The amount of gain (loss) recognized in the Consolidated Financial Statements is as follows (in millions):

 
  Twelve months ended December 31,  
 
  Amount of Gain (Loss) Recognized in Income on Derivative   Amount of Gain (Loss) Recognized in Income on Related Hedged Item  
 
  2011
  2010
  2011
  2010
 
   

Fair value hedges:

                         

Foreign exchange contracts

  $ 2   $ 6   $ (2 ) $ (6 )
   

        The amount of gain (loss) recognized in income on the ineffective portion of derivatives for 2011, 2010 and 2009 was negligible.

        Aon recorded a loss of $9 million and a gain of $10 million in Other general expenses for foreign exchange derivatives not designated or qualifying as hedges for 2011 and 2010, respectively.

Fair Value Measurements and Financial Instruments
Fair Value Measurements and Financial Instruments

15.  Fair Value Measurements and Financial Instruments

        Accounting standards establish a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:

  • Level 1 — observable inputs such as quoted prices for identical assets in active markets;

    Level 2 — inputs other than quoted prices for identical assets in active markets, that are observable either directly or indirectly; and

    Level 3 — unobservable inputs in which there is little or no market data which requires the use of valuation techniques and the development of assumptions.

        The following methods and assumptions are used to estimate the fair values of the Company's financial instruments:

        Money market funds and highly liquid debt securities are carried at cost and amortized cost, respectively, as an approximation of fair value. Based on market convention, the Company considers cost a practical and expedient measure of fair value.

        Cash, cash equivalents, and highly liquid debt instruments consist of cash and institutional short-term investment funds. The Company independently reviews the short-term investment funds to obtain reasonable assurance the fund net asset value is $1 per share.

        Equity investments consist of domestic and international equity securities and exchange traded equity derivatives valued using the closing stock price on a national securities exchange. Over the counter equity derivatives are valued using observable inputs such as underlying prices of the equity security and volatility. The Company independently reviews the listing of Level 1 equity securities in the portfolio and agrees the closing stock prices to a national securities exchange, and on a sample basis, independently verifies the observable inputs for Level 2 equity derivatives and securities.

        Fixed income investments consist of certain categories of bonds and derivatives. Corporate, government, and agency bonds are valued by pricing vendors who estimate fair value using recently executed transactions and proprietary models based on observable inputs, such as interest rate spreads, yield curves and credit risk. Asset-backed securities are valued by pricing vendors who estimate fair value using discounted cash flow models utilizing observable inputs based on trade and quote activity of securities with similar features. Fixed Income Derivatives are valued by pricing vendors using observable inputs such as interest rates and yield curves. The Company obtains a detailed understanding of the models, inputs, and assumptions used in developing prices provided by its vendors. This understanding includes extensive discussions with valuation resources at the vendor. During these discussions, the Company uses a fair value measurement questionnaire, which is part of the Company's internal controls over financial reporting, to obtain the information necessary to assert the model, inputs and assumptions used comply with U.S. GAAP, including disclosure requirements. The Company also obtains observable inputs from the pricing vendor and independently verifies the observable inputs, as well as assesses assumptions used for reasonableness based on relevant market conditions and internal Company guidelines. If an assumption is deemed unreasonable, based on the Company's guidelines, it is then reviewed by a member of management and the fair value estimate provided by the vendor is adjusted, if deemed appropriate. These adjustments do not occur frequently and have not historically been material to the fair value estimates used in the Consolidated Financial Statements.

        Pooled funds consist of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles. Pooled investment funds fair value is estimated based on the proportionate share ownership in the underlying net assets of the investment, which is based on the fair value of the underlying securities that trade on a national securities exchange. Where possible, the Company independently reviews the listing securities in the portfolio and agrees the closing stock prices to a national securities exchange. The Company gains an understanding of the investment guidelines and valuation policies of the fund and holds extensive discussions regarding fund performance with pooled fund managers. The Company obtains audited fund manager financial statements, when available. If the pooled fund is designed to replicate a publicly traded index, the Company compares the performance of the fund to the index to assess the reasonableness of the fair value measurement.

        Alternative investments consist of limited partnerships, private equity and hedge funds. Alternative investment fair value is generally estimated based on the proportionate share ownership in the underlying net assets of the investment as determined by the general partner or investment manager. The valuations are based on various factors depending on investment strategy, proprietary models, and specific financial data or projections. The Company obtains audited fund manager financial statements, when available. The Company obtains a detailed understanding of the models, inputs, and assumptions used in developing prices provided by the investment managers (or appropriate party). During these discussions with the investment manager, the Company uses a fair value measurement questionnaire, which is part of the Company's internal controls over financial reporting, to obtain the information necessary to assert the model, inputs and assumptions used comply with U.S. GAAP, including disclosure requirements. The Company also obtains observable inputs from the investment manager and independently verifies the observable inputs, as well as assesses assumptions used for reasonableness based on relevant market conditions and internal Company guidelines. If an assumption is deemed unreasonable, based on the Company's guidelines, it is then reviewed by a member of management and the fair value estimate provided by the vendor is adjusted, if deemed appropriate. These adjustments do not occur frequently and have not historically been material to the fair value estimates used in the Consolidated Financial Statements.

        Derivatives are carried at fair value, based upon industry standard valuation techniques that use, where possible, current market-based or independently sourced pricing inputs, such as interest rates, currency exchange rates, or implied volatilities.

        Annuity contracts consist of insurance group annuity contracts purchased to match the pension benefit payment stream owed to certain selected plan participant demographics within a few major UK defined benefit plans. Annuity contracts are valued using a discounted cash flow model utilizing assumptions such as discount rate, mortality, and inflation. The Company independently verifies the observable inputs.

        Real estate and REITS consist of publicly traded REITS and direct real estate investments. Level 1 REITS are valued using the closing stock price on a national securities exchange. The Level 3 values are based on the proportionate share of ownership in the underlying net asset value as determined by the investment manager. The Company independently reviews the listing of Level 1 REIT securities in the portfolio and agrees the closing stock prices to a national securities exchange. The Company gains an understanding of the investment guidelines and valuation policies of the Level 3 real estate funds and discusses performance with fund managers. The Company obtains audited fund manager financial statements, when available. See the description of "Alternative Investments" for further detail on valuation procedures surrounding Level 3 REITS.

        Guarantees are carried at fair value, which is based on discounted estimated future cash flows using published historical cumulative default rates and discount rates commensurate with the underlying exposure.

        Debt is carried at outstanding principal balance, less any unamortized discount or premium. Fair value is based on quoted market prices or estimates using discounted cash flow analyses based on current borrowing rates for similar types of borrowing arrangements.

        The following table presents the categorization of the Company's assets and liabilities that are measured at fair value on a recurring basis at December 31, 2011 and 2010 (in millions):

 
   
  Fair Value Measurements Using  
 
  Balance at
December 31, 2011

  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

  Significant
Other
Observable
Inputs (Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Assets:

                         

Money market funds and highly liquid debt securities (1)

  $ 2,428   $ 2,403   $ 25   $  

Other investments

                         

Fixed maturity securities

                         

Corporate bonds

    12             12  

Government bonds

    3         3      

Derivatives

                         

Interest rate contracts

    16         16      

Foreign exchange contracts

    141         141      

Liabilities:

                         

Derivatives

                         

Foreign exchange contracts

    189         189      
   
(1)
Includes $2,403 million of money market funds and $25 million of highly liquid debt securities that are classified as fiduciary assets, short-term investments or cash equivalents in the Consolidated Statements of Financial Position, depending on their nature and initial maturity. See Note 7 "Investments" for additional information regarding the Company's investments.

 
   
  Fair Value Measurements Using  
 
  Balance at
December 31, 2010

  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

  Significant
Other
Observable
Inputs (Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Assets:

                         

Money market funds and highly liquid debt securities (1)

  $ 2,618   $ 2,591   $ 27   $  

Other investments

                         

Fixed maturity securities

                         

Corporate bonds

    12             12  

Government bonds

    3         3      

Derivatives

                         

Interest rate contracts

    15         15      

Foreign exchange contracts

    159         159      

Liabilities:

                         

Derivatives

                         

Foreign exchange contracts

    158         158      
   
(1)
Includes $2,591 million of money market funds and $27 million of highly liquid debt securities that are classified as fiduciary assets, short-term investments or cash equivalents in the Consolidated Statements of Financial Position, depending on their nature and initial maturity. See Note 7 "Investments" for additional information regarding the Company's investments.

        The following table presents the changes in the Level 3 fair-value category in 2011 and 2010 (in millions):

 
  Fair Value Measurements Using Level 3 Inputs  
 
  Other
Investments

  Guarantees
 
   

Balance at January 1, 2010

    100     (4 )

Total gains (losses):

             

Included in earnings

        4  

Included in other comprehensive income

         

Purchases and sales

    (1 )    

Transfers (1)

    (87      
   

Balance at December 31, 2010

  $ 12   $  
   

Total gains (losses):

             

Included in earnings

         

Included in other comprehensive income

         

Purchases

         

Sales

         

Transfers (1)

         
   

Balance at December 31, 2011

  $ 12   $  
   
(1)
Transfers represent the removal of the investment in PEPS I preferred stock as a result of consolidating PEPS I on January 1, 2010.

        The majority of the Company's financial instruments is either carried at fair value or has a carrying amount that approximates fair value.

        The following table discloses the Company's financial instruments where the carrying amounts and fair values differ (in millions):

As of December 31
  2011
  2010
 
   
 
  Carrying
Value

  Fair
Value

  Carrying
Value

  Fair
Value

 
   

Long-term debt

  $ 4,155   $ 4,494   $ 4,014   $ 4,172  
   
Commitments and Contingencies
Commitments and Contingencies

16.  Commitments and Contingencies

Legal

        Aon and its subsidiaries are subject to numerous claims, tax assessments, lawsuits and proceedings that arise in the ordinary course of business, which frequently include errors and omissions ("E&O") claims. The damages claimed in these matters are or may be substantial, including, in many instances, claims for punitive, treble or extraordinary damages. Aon has historically purchased E&O insurance and other insurance to provide protection against certain losses that arise in such matters. Aon has exhausted or materially depleted its coverage under some of the policies that protect the Company and, consequently, is self-insured or materially self-insured for some historical claims. Accruals for these exposures, and related insurance receivables, when applicable, have been recognized to the extent that losses are deemed probable and are reasonably estimable. These amounts are adjusted from time to time as developments warrant. Amounts related to settlement provisions are recorded in Other general expenses in the Consolidated Statements of Income.

        At the time of the 2004-05 investigation of the insurance industry by the Attorney General of New York and other regulators, purported classes of clients filed civil litigation against Aon and other companies under a variety of legal theories, including state tort, contract, fiduciary duty, antitrust and statutory theories and federal antitrust and Racketeer Influenced and Corrupt Organizations Act ("RICO") theories. The federal actions were consolidated in the U.S. District Court for the District of New Jersey, and a state court collective action was filed in California. In the New Jersey actions, the Court dismissed plaintiffs' federal antitrust and RICO claims in separate orders in August and October 2007, respectively. In August 2010, the U.S. Court of Appeals for the Third Circuit affirmed the dismissals of most, but not all, of the claims. In March 2011, Aon entered into a Memorandum of Understanding documenting a settlement of the civil cases consolidated in the U.S. District Court for the District of New Jersey. Under that agreement, Aon will pay $550,000 in exchange for dismissal of the class claims. This agreement remains subject to court approval. Several non-class claims brought by individual plaintiffs who opted out of the class action proceeding will remain pending, but the Company does not believe these present material exposure to the Company individually or in the aggregate. The outcome of these lawsuits, and any losses or other payments that may result, cannot be predicted at this time.

        Following inquiries from regulators, the Company commenced an internal review of its compliance with certain U.S. and non-U.S. anti-corruption laws, including the U.S. Foreign Corrupt Practices Act ("FCPA"). In January 2009, Aon Limited, Aon's principal U.K. brokerage subsidiary, entered into a settlement agreement with the Financial Services Authority ("FSA") to pay a £5.25 million fine arising from its failure to exercise reasonable care to establish and maintain effective systems and controls to counter the risks of bribery arising from the use of overseas firms and individuals who helped it win business. On December 20, 2011, Aon entered into settlement agreements with the U.S. Department of Justice ("DOJ") and the U.S. Securities and Exchange Commission ("SEC"). Both settlements arose from and related to the making of improper payments, directly and through third parties, to government officials, the failure to maintain accurate books and records and the failure to maintain sufficient internal controls to prevent violations of the FCPA. The DOJ settlement involved a Non-Prosecution Agreement and also consisted of a monetary penalty in the amount of $1.8 million. The SEC settlement required Aon to pay a total of $14.5 million in disgorgement and prejudgment interest. Under the Non-Prosecution Agreement, Aon must bring to the DOJ's attention all criminal conduct by, or criminal investigations of, Aon or any of its senior managerial employees that comes to the attention of Aon or its senior management, as well as any administrative proceeding or civil action brought by any U.S. or foreign governmental authority that alleges fraud or corruption by or against Aon.

        A retail insurance brokerage subsidiary of Aon provides insurance brokerage services to Northrop Grumman Corporation ("Northrop"). This Aon subsidiary placed Northrop's excess property insurance program for the period covering 2005. Northrop suffered a substantial loss in August 2005 when Hurricane Katrina damaged Northrop's facilities in the Gulf states. Northrop's excess insurance carrier, Factory Mutual Insurance Company ("Factory Mutual"), denied coverage for the claim pursuant to a flood exclusion. Northrop sued Factory Mutual in the United States District Court for the Central District of California and later sought to add this Aon subsidiary as a defendant, asserting that if Northrop's policy with Factory Mutual does not cover the losses suffered by Northrop stemming from Hurricane Katrina, then this Aon subsidiary will be responsible for Northrop's losses. On August 26, 2010, the court granted in large part Factory Mutual's motion for partial summary judgment regarding the applicability of the flood exclusion and denied Northrop's motion to add this Aon subsidiary as a defendant in the federal lawsuit. On January 27, 2011, Northrop filed suit against this Aon subsidiary in state court in Los Angeles, California, pleading claims for negligence, breach of contract and negligent misrepresentation. Aon believes that it has meritorious defenses and intends to vigorously defend itself against these claims. The outcome of this lawsuit, and the amount of any losses or other payments that may result, cannot be predicted at this time.

        Another retail insurance brokerage subsidiary of Aon has been sued in Tennessee state court by a client, Opry Mills Mall Limited Partnership ("Opry Mills"), that sustained flood damage to its property in May 2010. The lawsuit seeks $200 million from numerous insurers with whom this Aon subsidiary placed the client's property insurance coverage. The insurers contend that only $50 million in coverage is available for the loss because the flood event occurred on property in a high hazard flood zone. Opry Mills is seeking full coverage from the insurers for the loss and has sued this Aon subsidiary in the alternative for the same $150 million difference on various theories of professional liability if the court determines there is not full coverage. Aon believes it has meritorious defenses and intends to vigorously defend itself against these claims. The outcome of this lawsuit, and any losses or other payments that may result, cannot be reasonably predicted at this time.

        A pensions consulting and administration subsidiary of Hewitt before its acquisition by Aon provided investment consulting advisory services to the Trustees of the Philips UK pension fund and the relevant employer of fund beneficiaries (together, "Philips"). In December 2011, the Aon subsidiary received notice of a potential claim alleging negligence and breach of duty. The notice asserts Philips' right to claim damages related to Philips' purchase of certain investment structures pursuant to the supply of the advisory services, which is said to have caused Philips to incur substantial losses. No lawsuit has yet been filed. Aon believes that it has meritorious defenses and intends to vigorously defend itself against these allegations. The outcome of this circumstance, and the amount of any losses or other payments that may result, cannot be reasonably predicted at this time.

        From time to time, Aon's clients may bring claims and take legal action pertaining to the performance of fiduciary responsibilities. Whether client claims and legal action related to the Company's performance of fiduciary responsibilities are founded or unfounded, if such claims and legal actions are resolved in a manner unfavorable to the Company, they may adversely affect Aon's financial results and materially impair the market perception of the Company and that of its products and services.

        Although the ultimate outcome of all matters referred to above cannot be ascertained, and liabilities in indeterminate amounts may be imposed on Aon or its subsidiaries, on the basis of present information, amounts already provided, availability of insurance coverages and legal advice received, it is the opinion of management that the disposition or ultimate determination of such claims will not have a material adverse effect on the consolidated financial position of Aon. However, it is possible that future results of operations or cash flows for any particular quarterly or annual period could be materially affected by an unfavorable resolution of these matters.

Guarantees and Indemnifications

        Aon provides a variety of guarantees and indemnifications to its customers and others. The maximum potential amount of future payments represents the notional amounts that could become payable under the guarantees and indemnifications if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or other methods. These amounts may bear no relationship to the expected future payments, if any, for these guarantees and indemnifications. Any anticipated amounts payable that are deemed to be probable and reasonably estimable are recognized in Aon's Consolidated Financial Statements.

        Aon has total letters of credit ("LOCs") outstanding for approximately $75 million and $71 million at December 31, 2011 and 2010, respectively. These letters of credit cover the beneficiaries related to Aon's Canadian pension plan, secure deductible retentions on Aon's own workers compensation program, an Aon Hewitt sublease agreement for office space, and one of the U.S. pension plans. Aon also has issued LOCs to cover contingent payments for taxes and other business obligations to third parties, and other guarantees for miscellaneous purposes at its international subsidiaries.

        Aon has certain contractual contingent guarantees for premium payments owed by clients to certain insurance companies. The maximum exposure with respect to such contractual contingent guarantees was approximately $48 million at December 31, 2011.

        Aon has provided commitments to fund certain limited partnerships in which it has an interest in the event that the general partners request funding. Some of these commitments have specific expiration dates and the maximum potential funding under these commitments was $64 million at December 31, 2011. During 2011, the Company funded $15 million of these commitments.

        Aon expects that as prudent business interests dictate, additional guarantees and indemnifications may be issued from time to time.

Related Party Transactions
Related Party Transactions

17.  Related Party Transactions

        During 2011, the Company, in the ordinary course of business, provided retail brokerage, consulting and financial advisory services to, and received wholesale brokerage services from, an entity that is controlled by one of the Company's stockholders. These transactions were negotiated at an arms-length basis and contain customary terms and conditions. During 2011, commissions and fee revenue from these transactions was approximately $9 million.

Segment Information
Segment Information

18.  Segment Information

        The Company has two reportable operating segments: Risk Solutions and HR Solutions. Unallocated income and expenses, when combined with the operating segments and after the elimination of intersegment revenues and expenses, total to the amounts in the Consolidated Financial Statements.

        Reportable operating segments have been determined using a management approach, which is consistent with the basis and manner in which Aon's chief operating decision maker ("CODM") uses financial information for the purposes of allocating resources and assessing performance. The CODM assesses performance based on operating segment operating income and generally accounts for intersegment revenue as if the revenue were from third parties and at what management believes are current market prices. The Company does not present net assets by segment as this information is not reviewed by the CODM.

        Risk Solutions acts as an advisor and insurance and reinsurance broker, helping clients manage their risks, via consultation, as well as negotiation and placement of insurance risk with insurance carriers through Aon's global distribution network.

        HR Solutions partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance by designing, implementing, communicating and administering a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies.

        Aon's total revenue is as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 6,817   $ 6,423   $ 6,305  

HR Solutions

    4,501     2,111     1,267  

Intersegment elimination

    (31 )   (22 )   (26 )
   

Total operating segments

    11,287     8,512     7,546  

Unallocated

            49  
   

Total revenue

  $ 11,287   $ 8,512   $ 7,595  
   

        Commissions, fees and other revenues by product are as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Retail brokerage

  $ 5,303   $ 4,925   $ 4,747  

Reinsurance brokerage

    1,463     1,444     1,485  
   

Total Risk Solutions Segment

    6,766     6,369     6,232  

Consulting services

    2,251     1,387     1,075  

Outsourcing

    2,272     731     191  

Intrasegment

    (23 )   (8 )    
   

Total HR Solutions Segment

    4,500     2,110     1,266  

Intersegment

    (31 )   (22 )   (26 )

Unallocated

            49  
   

Total commissions, fees and other revenues

  $ 11,235   $ 8,457   $ 7,521  
   

        Fiduciary investment income by segment is as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 51   $ 54   $ 73  

HR Solutions

    1     1     1  
   

Total fiduciary investment income

  $ 52   $ 55   $ 74  
   

        A reconciliation of segment operating income before tax to income from continuing operations before income taxes is as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 1,314   $ 1,194   $ 900  

HR Solutions

    448     234     203  
   

Segment income from continuing operations before income taxes

    1,762     1,428     1,103  

Unallocated revenue

            49  

Unallocated expenses

    (156 )   (202 )   (131 )

Interest income

    18     15     16  

Interest expense

    (245 )   (182 )   (122 )

Other income

    5         34  
   

Income from continuing operations before income taxes

  $ 1,384   $ 1,059   $ 949  
   

        Unallocated revenue consists primarily of revenue from the Company's ownership in investments.

        Unallocated expenses include administrative or other costs not attributable to the operating segments, such as corporate governance costs and the costs associated with corporate investments. Interest income represents income earned primarily on operating cash balances and miscellaneous income producing securities. Interest expense represents the cost of worldwide debt obligations.

        Other income primarily consists of equity earnings and realized gains (losses) on the sale of investments, disposal of businesses and extinguishment of debt.

        Revenues are generally attributed to geographic areas based on the location of the resources producing the revenues. Intercompany revenues and expenses are eliminated in consolidated results.

        Consolidated revenue by geographic area is as follows (in millions):

Years ended December 31
  Total
  United
States

  Americas
other than
U.S.

  United
Kingdom

  Europe,
Middle East,
& Africa

  Asia
Pacific

 
   

2011

  $ 11,287   $ 5,134   $ 1,176   $ 1,519   $ 2,377   $ 1,081  

2010

    8,512     3,400     978     1,322     2,035     777  

2009

    7,595     2,789     905     1,289     1,965     647  
   

        Consolidated non-current assets by geographic area are as follows (in millions):

Years ended December 31
  Total
  United
States

  Americas
other than
U.S.

  United
Kingdom

  Europe,
Middle East,
& Africa

  Asia
Pacific

 
   

2011

  $ 13,789   $ 8,617   $ 574   $ 1,589   $ 2,448   $ 561  

2010

    14,158     9,135     503     1,532     2,426     562  
   

        Effective January 1, 2012, the Company moved the global Aon Hewitt Health and Benefits consulting business from the HR Solutions segment to the Risk Solutions segment. The move will allow the business to benefit from a broader global distribution channel and to promote the Company's deep health and benefits capabilities in data and analytics with clients and insurance carriers. In addition to the disclosures required for the reportable segments as they existed at December 31, 2011, the Company has included the following disclosures reflecting the move of this business from HR Solutions to Risk Solutions below for all periods presented. Segment disclosures by geographic area are not impacted by this move.

        Aon's total revenue reflecting the move of the Health and Benefits consulting business from the HR Solutions segment to the Risk Solutions segment for all periods presented is as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 7,537   $ 6,989   $ 6,835  

HR Solutions

    3,781     1,545     737  

Intersegment elimination

    (31 )   (22 )   (26 )
   

Total operating segments

    11,287     8,512     7,546  

Unallocated

            49  
   

Total revenue

  $ 11,287   $ 8,512   $ 7,595  
   

        Aon's total commissions, fees and other revenues by product reflecting the move of the Health and Benefits consulting business from the HR Solutions segment to the Risk Solutions segment for all periods presented is as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Retail brokerage

  $ 6,022   $ 5,491   $ 5,277  

Reinsurance brokerage

    1,463     1,444     1,485  
   

Total Risk Solutions Segment

    7,485     6,935     6,762  

Consulting services

    1,532     821     545  

Outsourcing

    2,272     731     191  

Intrasegment

    (23 )   (8 )    
   

Total HR Solutions Segment

    3,781     1,544     736  

Intersegment

    (31 )   (22 )   (26 )

Unallocated

            49  
   

Total commissions, fees and other revenue

  $ 11,235   $ 8,457   $ 7,521  
   

        Aon's fiduciary investment income by segment reflecting the move of the Health and Benefits consulting business from the HR Solutions segment to the Risk Solutions segment for all periods presented is as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 52   $ 54   $ 73  

HR Solutions

        1     1  
   

Total fiduciary investment income

  $ 52   $ 55   $ 74  
   

        A reconciliation of segment operating income before tax to income from continuing operations before income taxes reflecting the move of the Health and Benefits consulting business from the HR Solutions segment to the Risk Solutions segment for all periods presented is as follows (in millions):

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 1,414   $ 1,307   $ 1,003  

HR Solutions

    348     121     100  
   

Segment income from continuing operations before income taxes

    1,762     1,428     1,103  

Unallocated revenue

            49  

Unallocated expenses

    (156 )   (202 )   (131 )

Interest income

    18     15     16  

Interest expense

    (245 )   (182 )   (122 )

Other income

    5         34  
   

Income from continuing operations before income taxes

  $ 1,384   $ 1,059   $ 949  
   
Quarterly Financial Data (Unaudited)
Quarterly Financial Data (Unaudited)

19.  Quarterly Financial Data (Unaudited)

        Selected quarterly financial data for the years ended December 31, 2011and 2010 as follows (in millions, except per share data):

 
  1Q
  2Q
  3Q
  4Q
  2011
 
   

INCOME STATEMENT DATA

                               

Commissions, fees and other revenue

  $ 2,748   $ 2,799   $ 2,708   $ 2,980   $ 11,235  

Fiduciary investment income

    11     12     15     14     52  
       

Total revenue

  $ 2,759   $ 2,811   $ 2,723   $ 2,994   $ 11,287  
       

Operating income

  $ 396   $ 434   $ 341   $ 435   $ 1,606  
       

Income from continuing operations

  $ 253   $ 265   $ 208   $ 280   $ 1,006  

Loss from discontinued operations

    2     2             4  
       

Net income

    255     267     208     280     1,010  

Less: Net income attributable to noncontrolling interests

    9     9     10     3     31  
       

Net income attributable to Aon stockholders

  $ 246   $ 258   $ 198   $ 277   $ 979  
   

PER SHARE DATA

                               

Basic:

                               

Income from continuing operations

  $ 0.72   $ 0.76   $ 0.59   $ 0.84   $ 2.91  

Loss from discontinued operations

              $ 0.01   $ 0.01  
       

Net income

  $ 0.72   $ 0.76   $ 0.59   $ 0.85   $ 2.92  
       

Diluted:

                               

Income from continuing operations

  $ 0.71   $ 0.75   $ 0.59   $ 0.82   $ 2.86  

Loss from discontinued operations

              $ 0.01     0.01  
       

Net income

  $ 0.71   $ 0.75   $ 0.59   $ 0.83   $ 2.87  
   

COMMON STOCK DATA

                               

Dividends paid per share

  $ 0.15   $ 0.15   $ 0.15   $ 0.15   $ 0.60  

Price range:

                               

High

  $ 53.17   $ 54.58   $ 52.17   $ 51.11   $ 54.58  

Low

  $ 43.31   $ 48.66   $ 39.68   $ 39.90   $ 39.68  

Shares outstanding

    330.5     326.7     323.3     324.4     324.4  

Average monthly trading volume

                     
   

 
  1Q
  2Q
  3Q
  4Q
  2010
 
   

INCOME STATEMENT DATA

                               

Commissions, fees and other revenue

  $ 1,891   $ 1,883   $ 1,786   $ 2,897   $ 8,457  

Fiduciary investment income

    13     15     15     12     55  
       

Total revenue

  $ 1,904   $ 1,898   $ 1,801   $ 2,909   $ 8,512  
       

Operating income

  $ 273   $ 268   $ 263   $ 422   $ 1,226  
       

Income from continuing operations

  $ 186   $ 184   $ 147   $ 242   $ 759  

Loss from discontinued operations

        (26 )       (1 )   (27 )
       

Net income

    186     158     147     241     732  

Less: Net income attributable to noncontrolling interests

    8     5     3     10     26  
       

Net income attributable to Aon stockholders

  $ 178   $ 153   $ 144   $ 231   $ 706  
   

PER SHARE DATA

                               

Basic:

                               

Income from continuing operations

  $ 0.65   $ 0.64   $ 0.52   $ 0.68   $ 2.50  

Loss from discontinued operations

        (0.09 )           (0.09 )
       

Net income

  $ 0.65   $ 0.55   $ 0.52   $ 0.68   $ 2.41  
       

Diluted:

                               

Income from continuing operations

  $ 0.63   $ 0.63   $ 0.51   $ 0.67   $ 2.46  

Loss from discontinued operations

        (0.09 )           (0.09 )
       

Net income

  $ 0.63   $ 0.54   $ 0.51   $ 0.67   $ 2.37  
   

COMMON STOCK DATA

                               

Dividends paid per share

  $ 0.15   $ 0.15   $ 0.15   $ 0.15   $ 0.60  

Price range:

                               

High

  $ 43.16   $ 44.34   $ 40.08   $ 46.24   $ 46.24  

Low

  $ 37.33   $ 37.06   $ 35.10   $ 38.72   $ 35.10  

Shares outstanding

    269.4     269.7     270.9     332.3     332.3  

Average monthly trading volume

    37.2     38.7     80.3     54.4     52.7  
   
Summary of Significant Accounting Principles and Practices (Policies)

Reclassifications and Change in Presentation

        Certain amounts in prior years' consolidated financial statements and related notes have been reclassified to conform to the 2011 presentation.

        Changes in the presentation of the Consolidated Statements of Cash Flows for 2010 and 2009 were made related to "Net (purchase) sales of short-term investments — funds held on behalf of clients." This line item had previously been presented in cash flows from investing activities and is now included in cash flows from operating activities. The Company believes this provides greater clarity into the operating and investing activities of the Company as this amount was offset by "Changes in funds held on behalf of clients" in the cash flows from operating activities. Although the Company invests funds held on behalf of clients, the handling of client money is believed to be part of the Company's day-to-day operating activities. The current year presentation separates "Fiduciary receivables," "Fiduciary liabilities," and "Short-term investments — funds held on behalf of clients" which, when taken together, net to zero. These three line items represent the changes in fiduciary funds when aggregated.

Use of Estimates

        The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on management's best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Aon adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, and foreign currency movements have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Revenue Recognition

        Risk Solutions segment revenues include insurance commissions and fees for services rendered and investment income on funds held on behalf of clients. Revenues are recognized when they are realized or realizable. The Company considers revenues to be earned and realized or realizable when there is persuasive evidence of an arrangement with a client, there is a fixed or determinable price, services have been rendered, and collectability is reasonably assured. For brokerage commissions, revenue is typically considered to be earned and realized or realizable at the completion of the placement process. Commission revenues are recorded net of allowances for estimated policy cancellations, which are determined based on an evaluation of historical and current cancellation data. Commissions on premiums billed directly by insurance carriers are recognized as revenue when the Company has sufficient information to conclude the amount due is determinable, which may not occur until cash is received from the insurance carrier. In instances when commissions relate to policy premiums that are billed in installments, revenue is recognized when the Company has sufficient information to determine the appropriate billing and the associated commission. Fees for services provided to clients are generally recognized ratably over the period that the services are rendered. Investment income is recognized as it is earned and realized or realizable.

        HR Solutions segment revenues consist primarily of fees paid by clients for consulting advice and outsourcing contracts. Fees paid by clients for consulting services are typically charged on an hourly, project or fixed-fee basis. Revenues from time-and-materials or cost-plus arrangements are recognized as services are performed. Revenues from fixed-fee contracts are generally recognized ratably over the term of the contract. Reimbursements received for out-of-pocket expenses are recorded as a component of revenues. The Company's outsourcing contracts typically have three-to-five year terms for benefits services and five-to-ten year terms for human resources business process outsourcing ("HR BPO") services. The Company recognizes revenues as services are performed. The Company also receives implementation fees from clients either up-front or over the ongoing services period as a component of the fee per participant. Lump sum implementation fees received from a client are initially deferred and generally recognized ratably over the ongoing contract services period. If a client terminates an outsourcing services arrangement prior to the end of the contract, a loss on the contract may be recorded, if necessary, and any remaining deferred implementation revenues would then be recognized into earnings over the remaining service period through the termination date. Services provided outside the scope of the Company's outsourcing contracts are recognized on a time-and-material or fixed-fee basis.

        In connection with the Company's long-term outsourcing service agreements, highly customized implementation efforts are often necessary to set up clients and their human resource or benefit programs on the Company's systems and operating processes. For outsourcing services sold separately or accounted for as a separate unit of accounting, specific, incremental and direct costs of implementation incurred prior to the services going live are generally deferred and amortized over the period that the related ongoing services revenue is recognized. Such costs may include internal and external costs for coding or customizing systems, costs for conversion of client data and costs to negotiate contract terms. For outsourcing services that are accounted for as a combined unit of accounting, specific, incremental and direct costs of implementation, as well as ongoing service delivery costs incurred prior to revenue recognition commencing, are deferred and amortized over the remaining contract services period. Contracts are assessed periodically to determine if they are onerous, in which case a loss is recognized in the current period. Deferred costs are assessed for recoverability to the extent the deferred cost exceeds related deferred revenue.

Stock Compensation Costs

        Share-based payments to employees, including grants of employee stock options, restricted stock and restricted stock units ("RSUs"), performance share awards ("PSAs") as well as employee stock purchases related to the Employee Stock Purchase Plan, are measured based on estimated grant date fair value. The Company recognizes compensation expense over the requisite service period for awards expected to ultimately vest. Forfeitures are estimated on the date of grant and revised if actual or expected forfeiture activity differs materially from original estimates.

Pension and Other Post-Retirement Benefits

        The Company has net period cost relating to its pension and other post-retirement benefit plans based on calculations that include various actuarial assumptions, including discount rates, assumed rates of return on plan assets, inflation rates, mortality rates, compensation increases, and turnover rates. The Company reviews its actuarial assumptions on an annual basis and modifies these assumptions based on current rates and trends. The effects of gains, losses, and prior service costs and credits are amortized over future service periods or future estimated lives if the plans are frozen. The funded status of each plan, calculated as the fair value of plan assets less the benefit obligation, is reflected in the Company's Consolidated Statements of Financial Position using a December 31 measurement date.

Net Income per Share

        Basic net income per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, including participating securities, which consist of unvested stock awards with non-forfeitable rights to dividends. Diluted net income per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, which have been adjusted for the dilutive effect of potentially issuable common shares (excluding those that are considered participating securities), including certain contingently issuable shares. The diluted earnings per share calculation reflects the more dilutive effect of either (1) the two-class method that assumes that the participating securities have not been exercised, or (2) the treasury stock method.

        Certain common stock equivalents, related primarily to options, were not included in the computation of diluted income per share because their inclusion would have been antidilutive.

Cash and Cash Equivalents

        Cash and cash equivalents include cash balances and all highly liquid investments with initial maturities of three months or less. Cash and cash equivalents included restricted balances of $191 million and $60 million at December 31, 2011 and 2010, respectively. The increase in the restricted balances is primarily due to a requirement for the Company to hold approximately $120 million of operating funds in the U.K.

Short-term Investments

        Short-term investments include certificates of deposit, money market funds and highly liquid debt instruments purchased with initial maturities in excess of three months but less than one year and are carried at amortized cost, which approximates fair value.

Fiduciary Assets and Liabilities

        In its capacity as an insurance agent and broker, Aon collects premiums from insureds and, after deducting its commission, remits the premiums to the respective insurers. Aon also collects claims or refunds from insurers on behalf of insureds. Uncollected premiums from insureds and uncollected claims or refunds from insurers are recorded as Fiduciary assets in the Company's Consolidated Statements of Financial Position. Unremitted insurance premiums and claims are held in a fiduciary capacity and the obligation to remit these funds is recorded as Fiduciary liabilities in the Company's Consolidated Statements of Financial Position. Some of the Company's outsourcing agreements also require it to hold funds to pay certain obligations on behalf of clients. These funds are also recorded as Fiduciary assets with the related obligation recorded as Fiduciary liabilities in the Company's Consolidated Statements of Financial Position.

        Aon maintained premium trust balances for premiums collected from insureds but not yet remitted to insurance companies of $4.2 billion and $3.5 billion at December 31, 2011 and 2010, respectively. These funds and a corresponding liability are included in Fiduciary assets and Fiduciary liabilities, respectively, in the accompanying Consolidated Statements of Financial Position.

Allowance for Doubtful Accounts

        The Company's allowance for doubtful accounts with respect to receivables is based on a combination of factors, including evaluation of historical write-offs, aging of balances and other qualitative and quantitative analyses. Receivables included an allowance for doubtful accounts of $104 million and $102 million at December 31, 2011 and 2010, respectively.

Fixed Assets

        Fixed assets are stated at cost, less accumulated depreciation. Included in this category is internal use software, which is software that is acquired, internally developed or modified solely to meet internal needs, with no plan to market externally. Costs related to directly obtaining, developing or upgrading internal use software are capitalized. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, which are generally as follows:

Asset Description
  Asset Life
 

Software

  3 to 7 years

Leasehold improvements

  Lesser of estimated useful life or lease term

Furniture, fixtures and equipment

  4 to 10 years

Computer equipment

  4 to 6 years

Buildings

  35 years

Automobiles

  6 years

Investments

        The Company accounts for investments as follows:

  • Equity method investments — Aon accounts for limited partnership and other investments using the equity method of accounting if Aon has the ability to exercise significant influence over, but not control of, an investee. Significant influence generally represents an ownership interest between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are initially recorded at cost and are subsequently adjusted for additional capital contributions, distributions, and Aon's proportionate share of earnings or losses.

    Cost method investments — Investments where Aon does not have an ownership interest of greater than 20% or the ability to exert significant influence over the operations of the investee are carried at cost.

    Fixed-maturity securities are classified as available for sale and are reported at fair value with any resulting unrealized gain or loss recorded directly to stockholders' equity as a component of Accumulated other comprehensive loss in the Company's Consolidated Statement of Financial Position, net of deferred income taxes. Interest on fixed-maturity securities is recorded in Interest income in the Company's Consolidated Statements of Income when earned and is adjusted for any amortization of premium or accretion of discount.

        The Company assesses any declines in the fair value of investments to determine whether such declines are other-than-temporary. This assessment is made considering all available evidence, including changes in general market conditions, specific industry and individual company data, the length of time and the extent to which the fair value has been less than cost, the financial condition and the near-term prospects of the entity issuing the security, and the Company's ability and intent to hold the investment until recovery of its cost basis. Other-than-temporary impairments of investments are recorded as part of Other income in the Consolidated Statements of Income in the period in which the determination is made.

Goodwill and Intangible Assets

        Goodwill represents the excess of acquisition cost over the fair value of the net assets in the acquisition of a business. Goodwill is allocated to various reporting units, which are one reporting level below the operating segment. Upon disposition of a business entity, goodwill is allocated to the disposed entity based on the fair value of that entity compared to the fair value of the reporting unit in which it was included. Goodwill is not amortized, but instead is tested for impairment at least annually. The goodwill impairment test is performed at the reporting unit level. Beginning in 2011, the Company initially performs a qualitative analysis to determine if it is more likely than not that the goodwill balance is impaired. If such a determination is made, then the Company will perform a two-step quantitative analysis. First, the fair value of each reporting unit is compared to its book value. If the fair value of the reporting unit is less than its book value, the Company performs a hypothetical purchase price allocation based on the reporting unit's fair value to determine the fair value of the reporting unit's goodwill. Fair value is determined using a combination of present value techniques and market prices of comparable businesses.

        Intangible assets include customer related and contract based assets representing primarily client relationships and non-compete covenants, trademarks, and marketing and technology related assets. These intangible assets, with the exception of trademarks, are amortized over periods ranging from 1 to 13 years, with a weighted average original life of 10 years. Trademarks are generally not amortized as such assets have been determined to have indefinite useful lives, and are tested at least annually for impairments using an analysis of expected future cash flows. Interim impairment testing may be performed when events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

Derivatives

        Derivative instruments are recognized in the Consolidated Statements of Financial Position at fair value. Where the Company has entered into master netting agreements with counterparties, the derivative positions are netted by counterparty and are reported accordingly in other assets or other liabilities. Changes in the fair value of derivative instruments are recognized immediately in earnings, unless the derivative is designated as a hedge and qualifies for hedge accounting.

        The Company has historically designated the following hedging relationships for certain transactions: (i) a hedge of the change in fair value of a recognized asset or liability or firm commitment ("fair value hedge"), (ii) a hedge of the variability in cash flows from a recognized variable-rate asset or liability or forecasted transaction ("cash flow hedge"), and (iii) a hedge of the net investment in a foreign operation ("net investment hedge"). For derivatives designated as hedges and that qualify as part of a hedging relationship, changes in fair value of the derivative instrument are deferred until the period in which the hedged item affects earnings.

        In order for a derivative to qualify for hedge accounting, the derivative must be formally designated as a fair value, cash flow, or a net investment hedge by documenting the relationship between the derivative and the hedged item. The documentation must include a description of the hedging instrument, the hedged item, the risk being hedged, Aon's risk management objective and strategy for undertaking the hedge, the method for assessing the effectiveness of the hedge, and the method for measuring hedge ineffectiveness. Additionally, the hedge relationship must be expected to be highly effective at offsetting changes in either the fair value or cash flows of the hedged item at both the inception of the hedge and on an ongoing basis. Aon assesses the ongoing effectiveness of its hedges and measures and records hedge ineffectiveness, if any, at the end of each quarter.

        For a derivative designated as hedging the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (a fair value hedge), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For a cash flow hedge that qualifies for hedge accounting, the effective portion of the change in fair value of a hedging instrument is recognized in Other Comprehensive Income ("OCI") and subsequently recognized in income when the hedged item affects earnings. The ineffective portion of the change in fair value is recognized immediately in earnings. For a net investment hedge, the effective portion of the change in fair value of the hedging instrument is recognized in OCI as part of the cumulative translation adjustment, while the ineffective portion is recognized immediately in earnings.

        Changes in the fair value of a derivative that is not designated as part of a hedging relationship (known as an "economic hedge") are recorded in either Interest income or Other general expenses (depending on the underlying exposure) in the Consolidated Statements of Income.

        The Company discontinues hedge accounting prospectively when (1) the derivative expires or is sold, terminated, or exercised, (2) the qualifying criteria are no longer met, or (3) management removes the designation of the hedge.

        When hedge accounting is discontinued because the derivative no longer qualifies as a fair value hedge, the Company continues to carry the derivative in the Consolidated Statements of Financial Position at its fair value, recognizes subsequent changes in the fair value of the derivative in the Consolidated Statements of Income, ceases to adjust the hedged asset or liability for changes in its fair value and accounts for the carrying amount (including the basis adjustment caused by designating the item as a hedged item) of the hedged asset, liability or firm commitment in accordance with GAAP applicable to those assets or liabilities.

        When hedge accounting is discontinued because the derivative continues to exist but no longer qualifies as a cash flow hedge, the Company continues to carry the derivative in the Consolidated Statements of Financial Position at its fair value, recognizes subsequent changes in the fair value of the derivative in the Consolidated Statements of Income, and continues to defer the derivative gain or loss in accumulated OCI (unless the forecasted transaction is deemed probable not to occur, at which time it would be reclassed to earnings) until the hedged forecasted transaction affects earnings. If the hedged forecasted transaction is not probable of occurring in the time period described in the hedge documentation or within a two month period of time thereafter, the deferred derivative gain or loss is immediately reclassified into earnings.

Foreign Currency

        Certain of the Company's non-US operations use their respective local currency as their functional currency. These operations that do not have the U.S. dollar as their functional currency translate their financial statements at the current rates of exchange in effect at the balance sheet date and revenues and expenses using rates that approximate those in effect during the period. The resulting translation adjustments are included as a component of stockholders' equity in Accumulated other comprehensive loss in the Consolidated Statements of Financial Position. Gains and losses from the remeasurement of monetary assets and liabilities that are denominated in a non-functional currency are included in Other general expenses within the Consolidated Statements of Income. The effect of foreign exchange gains and losses on the Consolidated Statements of Income was a gain of $10 million in 2011, and losses of $18 million and $26 million in 2010 and 2009, respectively. Included in these amounts were derivative losses of $20 million, $11 million and $15 million in 2011, 2010, and 2009, respectively.

Income Taxes

        Deferred income taxes are recognized for the effect of temporary differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted marginal tax rates and laws that are currently in effect. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in the period when the rate change is enacted.

        Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be objectively verified. Deferred tax assets are realized by having sufficient future taxable income to allow the related tax benefits to reduce taxes otherwise payable. The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carry-forwards, taxable income in carry-back years and tax planning strategies that are both prudent and feasible.

        The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than not. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company records penalties and interest related to unrecognized tax benefits in Income taxes in the Company's Consolidated Statements of Income.

Consolidation of Variable Interest Entities

        The Company uses two primary consolidation models under U.S. GAAP: the variable interest model, which is the primary model initially considered for all entities, and the voting model.

        Under the variable interest model, the Company consolidates a variable interest entity when it has a variable interest (or combination thereof) that provides the Company with a controlling financial interest. In determining if the Company has a controlling financial interest, management assesses the characteristics of the Company's variable interest (including involvement of related parties) in the variable interest entity, as well as the involvement of other variable interest holders. The Company has a controlling financial interest in a variable interest entity if it concludes that it has both (1) the power to direct the activities of the variable interest entity that are most important to the entity's economic performance and (2) the obligation to absorb losses and the right to receive benefits from the entity that could potentially be significant to the variable interest entity. If these conditions are met, the Company is the primary beneficiary of the variable interest entity and thus consolidates the entity in its Consolidated Financial Statements.

        For entities that fall under the voting model, the Company generally determines if it should consolidate the entity based on percentage ownership. Under this model, generally, if the Company owns more than 50% of the voting interest in the entity, it is consolidated.

Summary of Significant Accounting Principles and Practices (Tables)
Schedule of estimated useful lives of assets

 

 

Asset Description
  Asset Life
 

Software

  3 to 7 years

Leasehold improvements

  Lesser of estimated useful life or lease term

Furniture, fixtures and equipment

  4 to 10 years

Computer equipment

  4 to 6 years

Buildings

  35 years

Automobiles

  6 years
Other Financial Data (Tables)

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Equity earnings

  $ 7   $ 18   $ 18  

Realized gain (loss) on sale of investments

    18     (2 )   (1 )

(Loss) gain on disposal of businesses

        (4 )   13  

(Loss) gain on extinguishment of debt

    (19 )   (8 )   5  

Other

    (1 )   (4 )   (1 )
   

 

  $ 5   $   $ 34  
   

 

 

As of December 31
  2011
  2010
 
   

Software

  $ 730   $ 662  

Leasehold improvements

    407     436  

Furniture, fixtures and equipment

    326     342  

Computer equipment

    274     245  

Land and buildings

    108     108  

Automobiles

    39     39  

Construction in progress

    87     45  
   

 

    1,971     1,877  

Less: Accumulated depreciation

    1,188     1,096  
   

Fixed assets, net

  $ 783   $ 781  
   
Acquisitions and Dispositions (Tables)

 

 

Years ended December 31
  2011
  2010
 
   

Consideration transferred:

             

Hewitt

  $   $ 4,932  

Other acquisitions

    103     157  
   

Total

  $ 103   $ 5,089  
   

Intangible assets:

             

Goodwill:

             

Hewitt

  $ 50   $ 2,715  

Other acquisitions

    76     59  

Other intangible assets:

             

Hewitt

        2,905  

Other acquisitions

    33     78  
   

Total

  $ 159   $ 5,757  
   

 

 

$ and common share data in millions, except per share data
   
   
 
   

Cash consideration

             

Cash electing consideration

             

Number of shares of Hewitt common shares outstanding electing cash consideration

    7.78        

Cash consideration per common share outstanding

  $ 50.46        
             

Total cash paid to Hewitt shareholders electing cash consideration

  $ 393        
             

Mixed consideration

             

Number of shares of Hewitt common shares outstanding electing mixed consideration or not making an election

    44.52        

Cash consideration per common share outstanding

  $ 25.61        
             

Total cash paid to Hewitt shareholders electing mixed consideration or not making an election

  $ 1,140        
             

Stock electing consideration

             

Number of shares of Hewitt common shares outstanding electing stock consideration

    43.67        

Cash consideration per common share outstanding

  $ 21.19        
             

Total cash paid to Hewitt shareholders electing stock consideration

  $ 925        
             

Total cash consideration

        $ 2,458  

Stock consideration

             

Stock electing consideration

             

Number of shares of Hewitt common shares outstanding electing stock consideration

    43.67        

Exchange ratio

    0.7494        
             

Aon shares issued to Hewitt stockholders electing stock consideration

    32.73        
             

Mixed consideration

             

Number of shares of Hewitt common shares outstanding electing mixed consideration or not making an election

    44.52        

Exchange ratio

    0.6362        
             

Aon shares issued to Hewitt shareholders electing mixed consideration or not making an election

    28.32        
             

Total Aon common shares issued

    61.05        
             

Aon's closing common share price as of October 1, 2010

  $ 39.28        
             

Total fair value of stock consideration

        $ 2,398  

Fair value of Hewitt stock options converted to options to acquire Aon common stock

        $ 76  
             

Total fair value of cash and stock consideration

        $ 4,932  
   

 

 

 
  Amounts
recorded as of
the acquisition
date

 
   

Working capital (1)

  $ 348  

Property, equipment, and capitalized software

    297  

Identifiable intangible assets:

       

Customer relationships

    1,800  

Trademarks

    890  

Technology

    215  

Other noncurrent assets (2)

    344  

Long-term debt

    346  

Other noncurrent liabilities (3)

    360  

Net deferred tax liability (4)

    1,021  
   

Net assets acquired

    2,167  

Goodwill

    2,765  
   

Total consideration transferred

  $ 4,932  
   
(1)
Includes cash and cash equivalents, short-term investments, client receivables, other current assets, accounts payable and other current liabilities.

(2)
Includes primarily deferred contract costs and long-term investments.

(3)
Includes primarily unfavorable lease obligations and deferred contract revenues.

(4)
Included in Other current assets ($31 million), Deferred tax assets ($30 million), Other current liabilities ($7 million) and Deferred tax liabilities ($1.1 billion) in the Company's Consolidated Statements of Financial Position.

 

 

 
  Hewitt's operations
included in Aon's 2010
results

 
   

Revenues

  $ 791  

Operating income (1)

    23  
   
(1)
Includes amortization related to identifiable intangible assets ($37 million), acquisition and integration costs ($18 million) and restructuring expenses ($52 million).

 

 

 
  2010
  2009
 
   

Revenue

  $ 10,831   $ 10,669  
   

Net income from continuing operations attributable to Aon stockholders

  $ 736   $ 758  
   

Earnings per share from continuing operations attributable to Aon stockholders

             

Basic

  $ 2.17   $ 2.20  

Diluted

  $ 2.14   $ 2.15  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Revenues:

                   

AIS

  $   $   $  

Other

             
   

Total revenues

  $   $   $  

 

 

Income before income taxes:

                   

Operations:

                   

AIS

  $   $   $  

Other

            5  
   

 

            5  

Gain (loss) on sale:

                   

AIS

            86  

Other

    5     (39 )   (8 )
   

 

    5     (39 )   78  
   

Total pretax gain (loss)

  $ 5   $ (39 ) $ 83  

 

 

Net (loss) income:

                   

Operations

  $   $   $ 3  

Gain (loss) on sale

    4     (27 )   108  
   

Total

  $ 4   $ (27 ) $ 111  

 

 
Goodwill and Other Intangible Assets (Tables)

 

 

 
  Risk
Solutions

  HR
Solutions

  Total
 
   

Balance as of January 1, 2010

    5,693     385     6,078  

Goodwill related to Hewitt acquisition

        2,715     2,715  

Goodwill related to other acquisitions

    50     9     59  

Goodwill related to disposals

    (2 )       (2 )

Foreign currency revaluation

    (192 )   (11 )   (203 )
   

Balance as of December 31, 2010

  $ 5,549   $ 3,098   $ 8,647  

Goodwill related to acquisitions

    73     4     77  

Goodwill related to disposals

    (2 )       (2 )

Goodwill related to Hewitt acquisition

        50     50  

Goodwill related to other prior year acquisitions

        1     1  

Transfers

    (83 )   83      

Foreign currency revaluation

    20     (23 )   (3 )
   

Balance as of December 31, 2011

  $ 5,557   $ 3,213   $ 8,770  

 

 

 

 

 
  As of December 31  
 
  2011   2010  
 
  Gross
Carrying
Amount

  Accumulated
Amortization

  Net
Carrying
Amount

  Gross
Carrying
Amount

  Accumulated
Amortization

  Net
Carrying
Amount

 
   

Intangible assets with indefinite lives:

                                     

Trademarks

  $ 1,024   $   $ 1,024   $ 1,024   $   $ 1,024  

 

                                   

Intangible assets with finite lives:

                                   

Trademarks

    4     1     3     3         3  

Customer related and contract based

    2,608     615     1,993     2,605     344     2,261  

Marketing, technology and other

    606     350     256     606     283     323  
   

 

  $ 4,242   $ 966   $ 3,276   $ 4,238   $ 627   $ 3,611  

 

 

 

 

 
  HR
Solutions

  Risk
Solutions

  Total
 
   

2012

  $ 294   $ 117   $ 411  

2013

    275     109     384  

2014

    239     95     334  

2015

    208     81     289  

2016

    174     71     245  

Thereafter

    468     121     589  
   

 

  $ 1,658   $ 594   $ 2,252  

 

 
Restructuring (Tables)

 

 

 
  Aon
Hewitt
Plan

  Aon
Benfield
Plan

  2007
Plan

  Other
  Total
 
   

Balance at January 1, 2009

  $   $ 104   $ 101   $ 28   $ 233  

Expensed

        53     342     (1 )   394  

Cash payments

        (67 )   (248 )   (12 )   (327 )

Purchase accounting adjustment

        (49 )           (49 )

Foreign exchange translation and other

        4     7     1     12  
       

Balance at December 31, 2009

  $   $ 45   $ 202   $ 16   $ 263  
       

Assumed Hewitt restructuring liability (1)

    43                 43  

Expensed

    52     24     92         168  

Cash payments

    (8 )   (38 )   (178 )   (8 )   (232 )

Foreign exchange translation and other

    1     (5 )   (3 )   2     (5 )
       

Balance at December 31, 2010

  $ 88   $ 26   $ 113   $ 10   $ 237  
       

Expensed

    98     19     (11 )       106  

Cash payments

    (93 )   (24 )   (59 )   (2 )   (178 )

Foreign exchange translation and other

    2     (1 )   7         8  
   

Balance at December 31, 2011

  $ 95   $ 20   $ 50   $ 8   $ 173  

 

 
(1)
The Company assumed a $43 million net real estate related restructuring liability in connection with the Hewitt acquisition.

 

 

 
  2011
  2010
  Estimated
Total Cost for
Restructuring
Plan (1)

 
   

Workforce reduction

  $ 64   $ 49   $ 180  

Lease consolidation

    32     3     95  

Asset impairments

    7         47  

Other costs associated with restructuring (2)

    2         3  
   

Total restructuring and related expenses

  $ 105   $ 52   $ 325  

 

 
(1)
Actual costs, when incurred, may vary due to changes in the assumptions built into this plan. Significant assumptions that may change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives.

(2)
Other costs associated with restructuring initiatives, including moving costs and consulting and legal fees, are recognized when incurred.

 

 

 
  2011
  2010
  Estimated
Total Cost for
Restructuring
Plan

 
   

HR Solutions

  $ 90   $ 52   $ 297  

Risk Solutions

    15         28  
   

Total restructuring and related expenses

  $ 105   $ 52   $ 325  

 

 

 

 

 
  Purchase
Price
Allocation

  2009
  2010
  2011
  Total to
Date

  Estimated
Total Cost for
Restructuring
Period (1)

 
   

Workforce reduction

  $ 32   $ 38   $ 15   $ 33   $ 118   $ 125  

Lease consolidation

    20     14     7     (15 )   26     26  

Asset impairments

        2     2         4     4  

Other costs associated with restructuring (2)

    1     1     2     1     5     5  
   

Total restructuring and related expenses

  $ 53   $ 55   $ 26   $ 19   $ 153   $ 160  

 

 
(1)
Actual costs, when incurred, may vary due to changes in the assumptions built into this plan. Significant assumptions that may change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives.

(2)
Other costs associated with restructuring initiatives, including moving costs and consulting and legal fees, are recognized when incurred.

 

 

 
  2007
  2008
  2009
  2010
  2011
  Total 2007
Plan

 
   

Workforce reduction

  $ 17   $ 166   $ 251   $ 72   $ (2 ) $ 504  

Lease consolidation

    22     38     78     15     (9 ) $ 144  

Asset impairments

    4     18     15     2       $ 39  

Other costs associated with restructuring (1)

    3     29     13     5       $ 50  
   

Total restructuring and related expenses

  $ 46   $ 251   $ 357   $ 94   $ (11 ) $ 737  

 

 

 

 

 
  2007
  2008
  2009
  2010
  2011
  Total 2007
Plan

 
   

Risk Solutions

  $ 41   $ 234   $ 322   $ 84   $ (10 ) $ 671  

HR Solutions

    5     17     35     10     (1 ) $ 66  
   

Total restructuring and related expenses

  $ 46   $ 251   $ 357   $ 94   $ (11 ) $ 737  

 

 
Investments (Tables)

 

 

As of December 31
  2011
  2010
 
   

Cash and cash equivalents

  $ 272   $ 346  

Short-term investments

    785     785  

Fiduciary assets (1)

    4,190     3,489  

Investments

    239     312  
   

 

  $ 5,486   $ 4,932  

 

 
(1)
Fiduciary assets does not include fiduciary receivables

 

 

As of December 31
  2011
  2010
 
   

Equity method investments

  $ 164   $ 174  

Other investments, at cost (1)

    60     123  

Fixed-maturity securities

    15     15  
   

 

  $ 239   $ 312  

 

 
(1)
The reduction in other investments, at cost is primarily due to sales and redemptions
Debt (Tables)

 

 

As of December 31
  2011
  2010
 
   

Term loan credit facility due October 2013 (LIBOR + 1.38%)

  $ 428   $  

Term loan credit facility (LIBOR + 2.5%)

        975  

8.205% junior subordinated deferrable interest debentures due January 2027

    687     687  

6.25% EUR 500 debt securities due July 2014

    653     667  

5.00% senior notes due September 2020

    598     598  

3.50% senior notes due September 2015

    597     597  

3.125% senior notes due May 2016

    500      

4.76% CAD 375 debt securities due March 2018

    368      

5.05% CAD 375 debt securities due April 2011

        372  

6.25% senior notes due September 2040

    297     297  

7.375% debt securities due December 2012

    225     225  

Other

    139     88  
   

Total debt

    4,492     4,506  

Less short-term and current portion of long-term debt

    337     492  
   

Total long-term debt

  $ 4,155   $ 4,014  

 

 

 

 

2012

  $ 337  

2013

    404  

2014

    673  

2015

    612  

2016

    509  

Thereafter

    1,957  
   

 

  $ 4,492  
   
Lease Commitments (Tables)

 

 

Years ended December 31
  2011
  2010
  2009
 
   
Rental expense   $ 525   $ 429   $ 346  
Sub lease rental income     71     57     52  
   

Net rental expense

  $ 454   $ 372   $ 294  
   

At December 31, 2011, future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year, net of sublease rental income, are as follows (in millions):

2012

  $ 395  

2013

    373  

2014

    334  

2015

    296  

2016

    257  

Thereafter

    984  
   

Total minimum payments required

  $ 2,639  
   
Income Taxes (Tables)

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Income from continuing operations before income taxes:

                   

U.S.

  $ 301   $ 21   $ 215  

International

    1,083     1,038     734  
       

Total

  $ 1,384   $ 1,059   $ 949  
   

Income taxes (benefit):

                   

Current:

                   

U.S. federal

  $ (17 ) $ 16   $ 32  

U.S. state and local

    35     10     23  

International

    217     202     150  
       

Total current

    235     228     205  
   

Deferred:

                   

U.S. federal

    109     47     49  

U.S. state and local

    14     13     5  

International

    20     12     9  
       

Total deferred

    143     72     63  
   

Total income tax expense

  $ 378   $ 300   $ 268  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Statutory tax rate

    35.0 %   35.0 %   35.0 %

State income taxes, net of federal benefit

    2.3     1.1     2.0  

Taxes on international operations

    (11.5 )   (12.5 )   (12.0 )

Nondeductible expenses

    3.5     3.9     3.4  

Adjustments to prior year tax requirements

    (1.1 )   0.5     0.1  

Deferred tax adjustments, including

                   

statutory rate changes

    (0.8 )   0.2     0.1  

Other — net

    (0.1 )   0.2     (0.4 )
   

Effective tax rate

    27.3     28.4     28.2  
   

 

 

As of December 31
  2011
  2010
 
   

Deferred tax assets:

             

Employee benefit plans

  $ 940   $ 929  

Net operating loss and tax credit carryforwards

    484     430  

Other accrued expenses

    154     161  

Investment basis differences

    17     17  

Other

    100     66  
       

Total

    1,695     1,603  

Valuation allowance on deferred tax assets

    (219 )   (257 )
       

Total

  $ 1,476   $ 1,346  
   

Deferred tax liabilities:

             

Intangibles

  $ (1,333 ) $ (1,420 )

Deferred revenue

    (83 )   (49 )

Other accrued expenses

    (121 )   (41 )

Unrealized investment gains

    (21 )   (5 )

Unrealized foreign exchange gains

    (23 )   (23 )

Other

    (40 )   (75 )
       

Total

  $ (1,621 ) $ (1,613 )
   

Net deferred tax liability

  $ (145 ) $ (267 )
   

 

 

As of December 31,
  2011
  2010
 
   

Deferred tax assets — current

  $ 19   $ 121  

Deferred tax assets — non-current

    258     305  

Deferred tax liabilities — current

    (121 )   (30 )

Deferred tax liabilities — non-current

    (301 )   (663 )
   

Net deferred tax liability

  $ (145 ) $ (267 )
   

 

 

 
  2011
  2010
 
   

Balance at January 1

  $ 100   $ 77  

Additions based on tax positions related to the current year

    8     7  

Additions for tax positions of prior years

    5     4  

Reductions for tax positions of prior years

    (16 )   (7 )

Settlements

    (15 )   (1 )

Lapse of statute of limitations

    (4 )   (5 )

Acquisitions

    40     26  

Foreign currency translation

        (1 )
   

Balance at December 31

  $ 118   $ 100  
   
Stockholders' Equity (Tables)

 

 

 
  Year ended December 31,  
 
  2011
  2010
  2009
 
   

Income from continuing operations

  $ 13   $ 15   $ 15  

Income from discontinued operations

            3  
   

Net income

  $ 13   $ 15   $ 18  
   

 

 

 
  Year ended December 31,  
 
  2011
  2010
  2009
 
   

Shares for basic earnings per share (1)

    335.5     293.4     283.2  

Potentially issuable common shares

    5.4     4.7     7.9  
   

Shares for diluted earnings per share

    340.9     298.1     291.1  
   
(1)
Includes 7.6 million, 6.1 million and 6.9 million shares of participating securities for the years ended December 31, 2011, 2010, and 2009 respectively.

 

 

Year ended December 31, 2011
  Pretax
  Income Tax
Benefit
(Expense)

  Net
of Tax

 
   

Net derivative losses arising during the year

  $ (44 ) $ 15   $ (29 )

Reclassification adjustment

    25     (9 )   16  
   

Net change in derivative losses

    (19 )   6     (13 )

Net foreign exchange translation adjustments

   
(46

)
 
3
   
(43

)

Net post-retirement benefit obligation

    (593 )   197     (396 )
   

Total other comprehensive loss

    (658 )   206     (452 )

Less: other comprehensive income attributable to noncontrolling interest

    1         1  
   

Other comprehensive loss attributable to Aon stockholders

  $ (659 ) $ 206   $ (453 )
   

 

Year ended December 31, 2010
  Pretax
  Income Tax
Benefit
(Expense)

  Net
of Tax

 
   

Net derivative losses arising during the year

  $ (31 ) $ 10   $ (21 )

Reclassification adjustment

    (5 )   2     (3 )
   

Net change in derivative losses

    (36 )   12     (24 )

Net foreign exchange translation adjustments

    (92 )   (43 )   (135 )

Net post-retirement benefit obligation

    (76 )   35     (41 )
   

Total other comprehensive loss

    (204 )   4     (200 )

Less: other comprehensive loss attributable to noncontrolling interests

    (2 )       (2 )
   

Other comprehensive loss attributable to Aon stockholders

  $ (202 ) $ 4   $ (198 )
   

 

Year ended December 31, 2009
  Pretax
  Income Tax
Benefit
(Expense)

  Net
of Tax

 
   

Net derivative gains arising during the year

  $ 11   $ (4 ) $ 7  

Reclassification adjustment

    10     (4 )   6  
   

Net change in derivative gains

    21     (8 )   13  

Decrease in unrealized gains/losses

    (17 )   6     (11 )

Reclassification adjustment

    (2 )   1     (1 )
   

Net change in unrealized investment losses

    (19 )   7     (12 )

Net foreign exchange translation adjustments

    198     5     203  

Net post-retirement benefit obligations

    (583 )   170     (413 )
   

Total other comprehensive loss

    (383 )   174     (209 )

Less: other comprehensive income attributable to noncontrolling interests

    4         4  
   

Other comprehensive loss attributable to Aon stockholders

  $ (387 ) $ 174   $ (213 )
   

 

 

As of December 31
  2011
  2010
  2009
 
   

Net derivative losses

  $ (37 ) $ (24 ) $  

Net unrealized investment gains (1)

            44  

Net foreign exchange translation adjustments

    124     168     301  

Net postretirement benefit obligations

    (2,457 )   (2,061 )   (2,020 )
   

Accumulated other comprehensive loss, net of tax

  $ (2,370 ) $ (1,917 ) $ (1,675 )
   
(1)
Reflects the impact of adopting new accounting guidance which resulted in the consolidation of PEPS I effective January 1, 2010.

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Fixed maturities

  $   $   $ (3 )

Other investments

            (16 )
   

Total

  $   $   $ (19 )
   

 

 

As of December 31
  2011
  2010
  2009
 
   

Other investments

  $   $   $ 69  

Deferred taxes

            (25 )
   

Net unrealized investment gains

  $   $   $ 44  
   
Employee Benefits (Tables)

 

 

Years ended December 31
  2011
  2010
  2009
 
   

U.S.

  $ 104   $ 65   $ 56  

U.K.

    43     35     38  
   

 

  $ 147   $ 100   $ 94  
   
 
  U.S.   International  
(millions)
  2011
  2010
  2011
  2010
 
   

Change in projected benefit obligation

                         

At January 1

  $ 2,376   $ 2,139   $ 4,812   $ 4,500  

Service cost

            19     15  

Interest cost

    122     124     267     249  

Participant contributions

            1     1  

Plan amendment

            12      

Plan transfer and acquisitions

            17     203  

Actuarial loss (gain)

    51     34     (32 )   (101 )

Benefit payments

    (115 )   (111 )   (181 )   (183 )

Change in discount rate

    223     190     651     260  

Foreign currency revaluation

            17     (132 )
   

At December 31

  $ 2,657   $ 2,376   $ 5,583   $ 4,812  
   

Accumulated benefit obligation at end of year

  $ 2,657   $ 2,376   $ 5,508   $ 4,737  
   

Change in fair value of plan assets

                         

At January 1

  $ 1,244   $ 1,153   $ 4,288   $ 3,753  

Actual return on plan assets

    83     175     595     403  

Participant contributions

            1     1  

Employer contributions

    113     27     364     261  

Plan transfer and acquisitions

            13     192  

Benefit payments

    (115 )   (111 )   (181 )   (183 )

Foreign currency revaluation

            18     (139 )
   

At December 31

  $ 1,325   $ 1,244   $ 5,098   $ 4,288  
   

Market related value at end of year

  $ 1,410   $ 1,380   $ 5,098   $ 4,288  
 

Amount recognized in Statement of Financial Position at December 31

                         

Funded status

  $ (1,332 ) $ (1,132 ) $ (485 ) $ (524 )

Unrecognized prior-service cost

            28     17  

Unrecognized loss

    1,480     1,200     2,109     1,836  
   

Net amount recognized

  $ 148   $ 68   $ 1,652   $ 1,329  
   

 

 
  U.S.   International  
 
  2011
  2010
  2011
  2010
 
   

Prepaid benefit cost (included in Other non-current assets)

  $   $   $ 159   $ 59  

Accrued benefit liability (included in Pension, other post retirement, and post employment liabilities)

    (1,332 )   (1,132 )   (644 )   (583 )

Accumulated other comprehensive loss

    1,480     1,200     2,137     1,853  
   

Net amount recognized

    148     68     1,652     1,329  
   

 

 

 
  U.S.   International  
 
  2011
  2010
  2011
  2010
 
   

Net loss

  $ 1,480   $ 1,200   $ 2,109   $ 1,836  

Prior service cost

            28     17  
   

 

  $ 1,480   $ 1,200   $ 2,137   $ 1,853  
   

 

 

 
  U.S.   International  
 
  2011
  2010
  2009
  2011
  2010
  2009
 
   

Service cost

  $   $   $   $ 19   $ 15   $ 18  

Interest cost

    122     124     125     267     249     236  

Expected return on plan assets

    (120 )   (118 )   (102 )   (287 )   (240 )   (234 )

Amortization of prior-service cost

            (1 )   1     1      

Amortization of net actuarial loss

    31     24     28     53     54     41  
       

Net periodic benefit cost

  $ 33   $ 30   $ 50   $ 53   $ 79   $ 61  
   

The weighted-average assumptions used to determine future benefit obligations are as follows:

 
  U.S.   International  
 
  2011
  2010
  2011
  2010
 
   

Discount rate

    4.33 – 4.60 %   4.35 – 5.34 %   4.40 – 4.94 %   4.70 – 5.50 %

Rate of compensation increase

    N/A     N/A     2.25 – 3.55 %   2.50 – 4.00 %

        The weighted-average assumptions used to determine the net periodic benefit cost are as follows:

 
  U.S.   International  
 
  2011
  2010
  2009
  2011
  2010
  2009
 
   

Discount rate

    4.35 – 5.34 %   5.22% – 5.98 %   6.00 – 7.08 %   4.70 – 5.50 %   4.00 – 6.19 %   5.62 – 7.42 %

Expected return on plan assets

    8.80     8.80     8.70     3.20 – 7.20     4.70 – 7.00     5.48 – 7.00  

Rate of compensation increase

    N/A     N/A     N/A     2.00 – 4.00     2.50 – 3.60     3.25 – 3.50  

Estimated future benefit payments for plans are as follows at December 31, 2011 (in millions):

 
  U.S.
  International
 
   

2012

  $ 137   $ 164  

2013

    147     172  

2014

    142     180  

2015

    148     187  

2016

    146     198  

2017 – 2021

    753     990  

 

 

 
   
  Fair Value Measurements Using  
Asset Category
  Balance at
December 31,
2011

  Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

  Significant
Other
Observable
Inputs
(Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Cash and cash equivalents (1)

  $ 22   $ 22   $   $  

Equity investments: (2)

                         

Large cap domestic

    151     151          

Small cap domestic

    58         58      

Large cap international

    97     9     88      

Equity derivatives

    173     63     110      

Fixed income investments: (3)

                         

Corporate bonds

    355         355      

Government and agency bonds

    116         116      

Asset-backed securities

    18         18      

Fixed income derivatives

    83         83      

Other investments:

                         

Alternative investments (4)

    191             191  

Commodity derivatives (5)

    19         19      

Real estate and REITS (6)

    42     42          
       

Total

  $ 1,325   $ 287   $ 847   $ 191  
   
(1)
Consists of cash and institutional short-term investment funds.

(2)
Consists of equity securities, equity derivatives, and pooled equity funds.

(3)
Consists of corporate and government bonds, asset-backed securities, and fixed income derivatives.

(4)
Consists of limited partnerships, private equity and hedge funds.

(5)
Consists of long-dated options on a commodity index.

(6)
Consists of exchange traded REITS.

 
   
  Fair Value Measurements Using  
Asset Category
  Balance at
December 31,
2010

  Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

  Significant
Other
Observable
Inputs
(Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Highly liquid debt instruments (1)

  $ 27   $ 1   $ 26   $  

Equity investments: (2)

                         

Large cap domestic

    247     247          

Small cap domestic

    22         22      

Large cap international

    11     11          

Small cap global

                 

Equity derivatives

    231         231      

Fixed income investments: (3)

                         

Corporate bonds

    395         395      

Government and agency bonds

    50         50      

Asset-backed securities

    5         5      

Fixed income derivatives

    6         6      

Other investments:

                         

Alternative investments (4)

    193             193  

Commodity derivatives (5)

    18         18      

Real estate and REITS (6)

    39     39          
       

Total

  $ 1,244   $ 298   $ 753   $ 193  
   
(1)
Consists of cash and institutional short-term investment funds.

(2)
Consists of equity securities and equity derivatives.

(3)
Consists of corporate and government bonds, asset-backed securities, and fixed income derivatives.

(4)
Consists of limited partnerships, private equity and hedge funds.

(5)
Consists of long-dated options on a commodity index.

(6)
Consists of exchange traded REITS.

 

 

 
  Fair Value
Measurement
Using
Level 3
Inputs

 
   

Balance at January 1, 2010

  $ 138  

Actual return on plan assets:

       

Relating to assets still held at December 31, 2010

    1  

Relating to assets sold during 2010

    8  

Purchases, sales and settlements

    35  

Transfer in/(out) of level 3

    11  
       

Balance at December 31, 2010

    193  

Actual return on plan assets:

       

Relating to assets still held at December 31, 2011

    (8 )

Relating to assets sold during 2011

    1  

Purchases, sales and settlements

    5  

Transfer in/(out) of Level 3

     
       

Balance at December 31, 2011

  $ 191  
   

 

 

 
   
  Fair Value Measurements Using  
 
  Balance at
December 31,
2011

  Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

  Significant
Other
Observable
Inputs
(Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Cash & cash equivalents

  $ 276   $ 276   $   $  

Equity investments:

                         

Pooled funds: (1)

                         

Global

    960         960      

Europe

    347         347      

North America

    56         56      

Equity securities — global (2)

    128     128          

Derivatives (2)

    11         11      

Fixed income investments:

                         

Pooled funds (1)

                         

Fixed income securities

    823         823      

Derivatives

    21         21      

Fixed income securities (3)

    1,355     1,299     56      

Annuities

    419             419  

Derivatives (3)

    178         178      

Other investments:

                         

Pooled funds: (1)

                         

Commodities

    26         26      

REITS

    4         4      

Real estate (4)

    134             134  

Derivatives

    14         14      

Alternative investments (5)

    346             346  
       

Total

  $ 5,098   $ 1,703   $ 2,496   $ 899  
   
(1)
Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.

(2)
Consists of equity securities and equity derivatives.

(3)
Consists of corporate and government bonds and fixed income derivatives.

(4)
Consists of property funds and trusts holding direct real estate investments.

(5)
Consists of limited partnerships, private equity and hedge funds.

 
   
  Fair Value Measurements Using  
Asset Category
  Balance at
December 31,
2010

  Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

  Significant
Other
Observable
Inputs
(Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Cash & cash equivalents

  $ 54   $ 54   $   $  

Equity investments:

                         

Pooled funds: (1)

                         

Global

    823         661     162  

Europe

    574         574      

North America

    133         133      

Asia Pacific

    67         67      

Other equity securities — global (2)

    129     121     8      

Fixed income investments:

                         

Pooled funds (1)

    947         907     40  

Fixed income securities (3)

    805         805      

Annuities

    380             380  

Derivatives (3)

    (28 )       (28 )    

Other investments:

                         

Pooled Funds: (1)

                         

Commodities

    34         34      

REITS

    8         8      

Real estate (4)

    127             127  

Alternative investments (5)

    235         17     218  
       

Total

  $ 4,288   $ 175   $ 3,186   $ 927  
   
(1)
Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.

(2)
Consists of equity securities and equity derivatives.

(3)
Consists of corporate and government bonds and fixed income derivatives.

(4)
Consists of property funds and trusts holding direct real estate investments.

(5)
Consists of limited partnerships, private equity and hedge funds.

 

 

 
  Fair Value Measurements Using Level 3 Inputs  
 
  Global
  Fixed
  Annuities
  Real
Estate

  Alternative
Investments

  Total
 
   

Balance at January 1, 2010

  $ 145   $   $ 432   $ 136   $ 33   $ 746  

Actual return on plan assets:

                                     

Relating to assets still held at December 31, 2010

    20     2     (38 )   9     7      

Relating to assets sold during 2010

    2                 2     4  

Purchases, sales and settlements

    10     38         (12 )   176     212  

Foreign Exchange

    (15 )       (14 )   (6 )       (35 )
       

Balance at December 31, 2010

    162     40     380     127     218     927  

Actual return on plan assets:

                                     

Relating to assets still held at December 31, 2011

            35     3         38  

Relating to assets sold during 2011

                    1     1  

Purchases, sales and settlements

                2     86     88  

Transfers in/(out) of Level 3 (1)

    (162 )   (40 )       1     41     (160 )

Foreign Exchange

            4     1         5  
       

Balance at December 31, 2011

  $   $   $ 419   $ 134   $ 346   $ 899  
   
(1)
During 2011, a pooled global equity fund with a fair value of $162 million was transferred to Level 2 due to increased observability of the inputs. Additionally, a fund of funds with a fair value of $40 million was reclassified within Level 3 to be consistent with other similar fund of funds classified as Alternative Investments within the fair value hierarchy.

 

 

 
  2011
  2010
 
   

Accumulated projected benefit obligation

  $ 134   $ 119  

Fair value of plan assets

    20     22  
       

Funded status

    (114 )   (97 )
       

Unrecognized prior-service credit

    (8 )   (11 )

Unrecognized loss

    25     9  
       

Net amount recognized

  $ (97 ) $ (99 )
   

 

 

 
  2011
  2010
  2009
 
   

Net periodic benefit cost recognized (millions)

  $ 6   $ 4   $ 4  

Weighted-average discount rate used to determine future benefit obligations

    4.33 – 5.00 %   4.92 – 6.00 %   5.90 – 6.19 %

Weighted-average discount rate used to determine net periodic benefit costs

    4.92 – 6.00 %   5.90 – 6.19 %   6.22 – 7.50 %
Stock Compensation Plans (Tables)

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Restricted Stock Units ("RSUs")

  $ 142   $ 138   $ 124  

Performance Share Awards ("PSAs")

    78     62     60  

Stock options

    9     17     21  

Employee stock purchase plans

    6     4     4  
       

Total stock-based compensation expense

    235     221     209  

Tax benefit

    77     75     68  
       

Stock-based compensation expense, net of tax

  $ 158   $ 146   $ 141  
   

 

 

 
  2011   2010   2009  
Years ended December 31
  Shares
  Fair
Value (1)

  Shares
  Fair
Value (1)

  Shares
  Fair
Value (1)

 
   

Non-vested at beginning of year

    10,674   $ 38     12,850   $ 36     14,060   $ 35  

Granted

    3,506     51     3,817     40     3,786     38  

Vested

    (3,773 )   39     (5,278 )   35     (4,330 )   33  

Forfeited

    (491 )   39     (715 )   35     (666 )   37  
       

Non-vested at end of year

    9,916     42     10,674     38     12,850     36  
   
(1)
Represents per share weighted average fair value of award at date of grant.

 

 

 
  2011
  2010
  2009
 
   

Target PSUs granted

    1,715     1,390     3,754  

Fair Value (1)

  $ 50   $ 39   $ 38  

Number of shares that would be issued based on current performance levels

    1,772     1,397     2,300  

Unamortized expense, based on current performance levels

  $ 60   $ 18   $ 4  
   
(1)
Represents per share weighted average fair value of award at date of grant.

 

 

Years ended December 31
  2011
  2010
  2009
 
   
 
  All Other
Options

  All Other
Options

  LPP
Options

  SSP
Options

  All Other
Options

 
   

Weighted average volatility

    26.1 %   28.5 %   35.5 %   34.1 %   32.0 %

Expected dividend yield

    1.3 %   1.6 %   1.3 %   1.5 %   1.5 %

Risk-free rate

    2.2 %   3.0 %   1.5 %   2.0 %   2.6 %
   

Weighted average expected life, in years

   
5.5
   
6.1
   
4.4
   
5.6
   
6.5
 

Weighted average estimated fair value per share

  $ 10.92   $ 10.37   $ 12.19   $ 11.82   $ 12.34  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   
 
  Shares
  Weighted-
Average
Exercise
Price Per
Share

  Shares
  Weighted-
Average
Exercise
Price Per
Share

  Shares
  Weighted-
Average
Exercise
Price Per
Share

 
   

Beginning outstanding

    13,919   $ 32     15,937   $ 33     19,666   $ 31  

Options issued in connection with the Hewitt acquisition

            4,545     22          

Granted

    80     53     143     38     1,551     38  

Exercised

    (4,546 )   32     (6,197 )   27     (4,475 )   27  

Forfeited and expired

    (337 )   36     (509 )   35     (805 )   38  
   

Outstanding at end of year

    9,116     32     13,919     32     15,937     33  
   

Exercisable at end of year

    7,833     30     11,293     30     9,884     31  
   

Shares available for grant

    24,508           22,777           8,257        
   

A summary of options outstanding and exercisable as of December 31, 2011 is as follows (shares in thousands):

 
  Options Outstanding   Options Exercisable  
Range of Exercise Prices
  Shares
Outstanding

  Weighted-
Average
Remaining
Contractual
Life (years)

  Weighted-
Average
Exercise Price
Per Share

  Shares
Exercisable

  Weighted-
Average
Remaining
Contractual
Life (years)

  Weighted-
Average
Exercise Price
Per Share

 
   

$14.71 – 22.86

    2,718     2.66   $ 20.95     2,718     2.66   $ 20.95  

  22.87 – 25.51

    663     3.40     25.37     663     3.40     25.37  

  25.52 – 32.53

    1,069     2.95     27.53     1,069     2.95     27.53  

  32.54 – 36.88

    1,277     2.96     36.05     1,037     2.41     35.96  

  36.89 – 43.44

    2,309     3.04     39.72     1,757     2.35     39.92  

  43.45 – 52.93

    1,080     4.49     46.24     589     4.09     45.52  
   

 

    9,116                 7,833              
   

 

 

 
  2011
  2010
  2009
 
   

Aggregate intrinsic value of stock options exercised

  $ 80   $ 87   $ 62  

Cash received from the exercise of stock options

    153     162     121  

Tax benefit realized from the exercise of stock options

    14     4     15  
   
Derivatives and Hedging (Tables)

 

 

 
   
   
  Derivative Assets (1)   Derivative Liabilities (2)  
 
  Notional Amount   Fair Value   Fair Value  
As of December 31
  2011
  2010
  2011
  2010
  2011
  2010
 
   

Derivatives accounted for as hedges:

                                     

Interest rate contracts

  $ 702   $ 826   $ 16   $ 15   $   $  

Foreign exchange contracts

    1,297     1,544     140     157     188     157  
       

Total

    1,999     2,370     156     172     188     157  

Derivatives not accounted for as hedges:

                                     

Foreign exchange contracts

    246     238     1     2     1     1  
       

Total

  $ 2,245   $ 2,608   $ 157   $ 174   $ 189   $ 158  
   

 

 

 
  December 31,  
Gain (Loss) recognized in Accumulated Other Comprehensive Loss:
  2011
  2010
 
   

Cash flow hedges:

             

Interest rate contracts

  $ (1 ) $ (10 )

Foreign exchange contracts

    (54 )   (145 )
       

Total

    (55 )   (155 )
       

Foreign net investment hedges:

             

Foreign exchange contracts

  $ (2 ) $ 111  
   

Gain (Loss) reclassified from Accumulated Other Comprehensive
Loss into Income (Effective Portion):


 

 


 

 


 
   

Cash flow hedges:

             

Interest rate contracts (1)

  $   $ 16  

Foreign exchange contracts (2)

    (36 )   (134 )
       

Total

    (36 )   (118 )
       

Foreign net investment hedges:

             

Foreign exchange contracts

  $   $  
   

 

 
  Twelve months ended December 31,  
 
  Amount of Gain (Loss) Recognized in Income on Derivative   Amount of Gain (Loss) Recognized in Income on Related Hedged Item  
 
  2011
  2010
  2011
  2010
 
   

Fair value hedges:

                         

Foreign exchange contracts

  $ 2   $ 6   $ (2 ) $ (6 )
   
Fair Value Measurements and Financial Instruments (Tables)

 

 

 
   
  Fair Value Measurements Using  
 
  Balance at
December 31, 2011

  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

  Significant
Other
Observable
Inputs (Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Assets:

                         

Money market funds and highly liquid debt securities (1)

  $ 2,428   $ 2,403   $ 25   $  

Other investments

                         

Fixed maturity securities

                         

Corporate bonds

    12             12  

Government bonds

    3         3      

Derivatives

                         

Interest rate contracts

    16         16      

Foreign exchange contracts

    141         141      

Liabilities:

                         

Derivatives

                         

Foreign exchange contracts

    189         189      
   
(1)
Includes $2,403 million of money market funds and $25 million of highly liquid debt securities that are classified as fiduciary assets, short-term investments or cash equivalents in the Consolidated Statements of Financial Position, depending on their nature and initial maturity. See Note 7 "Investments" for additional information regarding the Company's investments.

 
   
  Fair Value Measurements Using  
 
  Balance at
December 31, 2010

  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

  Significant
Other
Observable
Inputs (Level 2)

  Significant
Unobservable
Inputs
(Level 3)

 
   

Assets:

                         

Money market funds and highly liquid debt securities (1)

  $ 2,618   $ 2,591   $ 27   $  

Other investments

                         

Fixed maturity securities

                         

Corporate bonds

    12             12  

Government bonds

    3         3      

Derivatives

                         

Interest rate contracts

    15         15      

Foreign exchange contracts

    159         159      

Liabilities:

                         

Derivatives

                         

Foreign exchange contracts

    158         158      
   
(1)
Includes $2,591 million of money market funds and $27 million of highly liquid debt securities that are classified as fiduciary assets, short-term investments or cash equivalents in the Consolidated Statements of Financial Position, depending on their nature and initial maturity. See Note 7 "Investments" for additional information regarding the Company's investments.

 

 

 
  Fair Value Measurements Using Level 3 Inputs  
 
  Other
Investments

  Guarantees
 
   

Balance at January 1, 2010

    100     (4 )

Total gains (losses):

             

Included in earnings

        4  

Included in other comprehensive income

         

Purchases and sales

    (1 )    

Transfers (1)

    (87      
   

Balance at December 31, 2010

  $ 12   $  
   

Total gains (losses):

             

Included in earnings

         

Included in other comprehensive income

         

Purchases

         

Sales

         

Transfers (1)

         
   

Balance at December 31, 2011

  $ 12   $  
   
(1)
Transfers represent the removal of the investment in PEPS I preferred stock as a result of consolidating PEPS I on January 1, 2010.

 

 

As of December 31
  2011
  2010
 
   
 
  Carrying
Value

  Fair
Value

  Carrying
Value

  Fair
Value

 
   

Long-term debt

  $ 4,155   $ 4,494   $ 4,014   $ 4,172  
   
Segment Information (Tables)

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 6,817   $ 6,423   $ 6,305  

HR Solutions

    4,501     2,111     1,267  

Intersegment elimination

    (31 )   (22 )   (26 )
   

Total operating segments

    11,287     8,512     7,546  

Unallocated

            49  
   

Total revenue

  $ 11,287   $ 8,512   $ 7,595  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Retail brokerage

  $ 5,303   $ 4,925   $ 4,747  

Reinsurance brokerage

    1,463     1,444     1,485  
   

Total Risk Solutions Segment

    6,766     6,369     6,232  

Consulting services

    2,251     1,387     1,075  

Outsourcing

    2,272     731     191  

Intrasegment

    (23 )   (8 )    
   

Total HR Solutions Segment

    4,500     2,110     1,266  

Intersegment

    (31 )   (22 )   (26 )

Unallocated

            49  
   

Total commissions, fees and other revenues

  $ 11,235   $ 8,457   $ 7,521  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 51   $ 54   $ 73  

HR Solutions

    1     1     1  
   

Total fiduciary investment income

  $ 52   $ 55   $ 74  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 1,314   $ 1,194   $ 900  

HR Solutions

    448     234     203  
   

Segment income from continuing operations before income taxes

    1,762     1,428     1,103  

Unallocated revenue

            49  

Unallocated expenses

    (156 )   (202 )   (131 )

Interest income

    18     15     16  

Interest expense

    (245 )   (182 )   (122 )

Other income

    5         34  
   

Income from continuing operations before income taxes

  $ 1,384   $ 1,059   $ 949  
   

Consolidated revenue by geographic area is as follows (in millions):

Years ended December 31
  Total
  United
States

  Americas
other than
U.S.

  United
Kingdom

  Europe,
Middle East,
& Africa

  Asia
Pacific

 
   

2011

  $ 11,287   $ 5,134   $ 1,176   $ 1,519   $ 2,377   $ 1,081  

2010

    8,512     3,400     978     1,322     2,035     777  

2009

    7,595     2,789     905     1,289     1,965     647  
   

        Consolidated non-current assets by geographic area are as follows (in millions):

Years ended December 31
  Total
  United
States

  Americas
other than
U.S.

  United
Kingdom

  Europe,
Middle East,
& Africa

  Asia
Pacific

 
   

2011

  $ 13,789   $ 8,617   $ 574   $ 1,589   $ 2,448   $ 561  

2010

    14,158     9,135     503     1,532     2,426     562  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 7,537   $ 6,989   $ 6,835  

HR Solutions

    3,781     1,545     737  

Intersegment elimination

    (31 )   (22 )   (26 )
   

Total operating segments

    11,287     8,512     7,546  

Unallocated

            49  
   

Total revenue

  $ 11,287   $ 8,512   $ 7,595  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Retail brokerage

  $ 6,022   $ 5,491   $ 5,277  

Reinsurance brokerage

    1,463     1,444     1,485  
   

Total Risk Solutions Segment

    7,485     6,935     6,762  

Consulting services

    1,532     821     545  

Outsourcing

    2,272     731     191  

Intrasegment

    (23 )   (8 )    
   

Total HR Solutions Segment

    3,781     1,544     736  

Intersegment

    (31 )   (22 )   (26 )

Unallocated

            49  
   

Total commissions, fees and other revenue

  $ 11,235   $ 8,457   $ 7,521  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 52   $ 54   $ 73  

HR Solutions

        1     1  
   

Total fiduciary investment income

  $ 52   $ 55   $ 74  
   

 

 

Years ended December 31
  2011
  2010
  2009
 
   

Risk Solutions

  $ 1,414   $ 1,307   $ 1,003  

HR Solutions

    348     121     100  
   

Segment income from continuing operations before income taxes

    1,762     1,428     1,103  

Unallocated revenue

            49  

Unallocated expenses

    (156 )   (202 )   (131 )

Interest income

    18     15     16  

Interest expense

    (245 )   (182 )   (122 )

Other income

    5         34  
   

Income from continuing operations before income taxes

  $ 1,384   $ 1,059   $ 949  
   
Quarterly Financial Data (Unaudited) (Tables)
Quarterly Financial Data

 

 

 
  1Q
  2Q
  3Q
  4Q
  2011
 
   

INCOME STATEMENT DATA

                               

Commissions, fees and other revenue

  $ 2,748   $ 2,799   $ 2,708   $ 2,980   $ 11,235  

Fiduciary investment income

    11     12     15     14     52  
       

Total revenue

  $ 2,759   $ 2,811   $ 2,723   $ 2,994   $ 11,287  
       

Operating income

  $ 396   $ 434   $ 341   $ 435   $ 1,606  
       

Income from continuing operations

  $ 253   $ 265   $ 208   $ 280   $ 1,006  

Loss from discontinued operations

    2     2             4  
       

Net income

    255     267     208     280     1,010  

Less: Net income attributable to noncontrolling interests

    9     9     10     3     31  
       

Net income attributable to Aon stockholders

  $ 246   $ 258   $ 198   $ 277   $ 979  
   

PER SHARE DATA

                               

Basic:

                               

Income from continuing operations

  $ 0.72   $ 0.76   $ 0.59   $ 0.84   $ 2.91  

Loss from discontinued operations

              $ 0.01   $ 0.01  
       

Net income

  $ 0.72   $ 0.76   $ 0.59   $ 0.85   $ 2.92  
       

Diluted:

                               

Income from continuing operations

  $ 0.71   $ 0.75   $ 0.59   $ 0.82   $ 2.86  

Loss from discontinued operations

              $ 0.01     0.01  
       

Net income

  $ 0.71   $ 0.75   $ 0.59   $ 0.83   $ 2.87  
   

COMMON STOCK DATA

                               

Dividends paid per share

  $ 0.15   $ 0.15   $ 0.15   $ 0.15   $ 0.60  

Price range:

                               

High

  $ 53.17   $ 54.58   $ 52.17   $ 51.11   $ 54.58  

Low

  $ 43.31   $ 48.66   $ 39.68   $ 39.90   $ 39.68  

Shares outstanding

    330.5     326.7     323.3     324.4     324.4  

Average monthly trading volume

                     
   

 
  1Q
  2Q
  3Q
  4Q
  2010
 
   

INCOME STATEMENT DATA

                               

Commissions, fees and other revenue

  $ 1,891   $ 1,883   $ 1,786   $ 2,897   $ 8,457  

Fiduciary investment income

    13     15     15     12     55  
       

Total revenue

  $ 1,904   $ 1,898   $ 1,801   $ 2,909   $ 8,512  
       

Operating income

  $ 273   $ 268   $ 263   $ 422   $ 1,226  
       

Income from continuing operations

  $ 186   $ 184   $ 147   $ 242   $ 759  

Loss from discontinued operations

        (26 )       (1 )   (27 )
       

Net income

    186     158     147     241     732  

Less: Net income attributable to noncontrolling interests

    8     5     3     10     26  
       

Net income attributable to Aon stockholders

  $ 178   $ 153   $ 144   $ 231   $ 706  
   

PER SHARE DATA

                               

Basic:

                               

Income from continuing operations

  $ 0.65   $ 0.64   $ 0.52   $ 0.68   $ 2.50  

Loss from discontinued operations

        (0.09 )           (0.09 )
       

Net income

  $ 0.65   $ 0.55   $ 0.52   $ 0.68   $ 2.41  
       

Diluted:

                               

Income from continuing operations

  $ 0.63   $ 0.63   $ 0.51   $ 0.67   $ 2.46  

Loss from discontinued operations

        (0.09 )           (0.09 )
       

Net income

  $ 0.63   $ 0.54   $ 0.51   $ 0.67   $ 2.37  
   

COMMON STOCK DATA

                               

Dividends paid per share

  $ 0.15   $ 0.15   $ 0.15   $ 0.15   $ 0.60  

Price range:

                               

High

  $ 43.16   $ 44.34   $ 40.08   $ 46.24   $ 46.24  

Low

  $ 37.33   $ 37.06   $ 35.10   $ 38.72   $ 35.10  

Shares outstanding

    269.4     269.7     270.9     332.3     332.3  

Average monthly trading volume

    37.2     38.7     80.3     54.4     52.7  
   
Summary of Significant Accounting Principles and Practices (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Y
Dec. 31, 2010
Dec. 31, 2009
Cash and Cash Equivalents
 
 
 
Cash and cash equivalents, restricted
$ 191,000,000 
$ 60,000,000 
 
Operating funds in U.K.
120,000,000 
 
 
Fiduciary Assets and Liabilities
 
 
 
Premium trust balances
4,200,000,000 
3,500,000,000 
 
Allowance for Doubtful Accounts
 
 
 
Allowance for doubtful accounts receivable
104,000,000 
102,000,000 
 
Goodwill and Intangible Assets
 
 
 
Minimum useful life of finite-lived intangible assets (in years)
 
 
Maximum useful life of finite-lived intangible assets (in years)
13 
 
 
Weighted-average original life of finite-lived intangible assets (in years)
10 
 
 
Foreign Currency
 
 
 
Effect of foreign exchange gains (losses) on the consolidated statements of income
10,000,000 
(18,000,000)
(26,000,000)
Derivative losses
$ 20,000,000 
$ 11,000,000 
$ 15,000,000 
Buildings
 
 
 
Fixed Assets
 
 
 
Fixed assets, original life, weighted-average (in years)
35 
 
 
Automobiles
 
 
 
Fixed Assets
 
 
 
Fixed assets, original life, weighted-average (in years)
 
 
Minimum
 
 
 
Revenue Recognition
 
 
 
Term of outsourcing contracts for benefit services (in years)
 
 
Term of outsourcing contracts for HR BPO services (in years)
 
 
Short-term Investments
 
 
 
Short-term investment, maturity period (in months/year)
 
 
Consolidation of Variable Interest Entities
 
 
 
Ownership percentage, criteria for consolidation
50.00% 
 
 
Minimum |
Software
 
 
 
Fixed Assets
 
 
 
Fixed assets, useful life, minimum (in years)
 
 
Minimum |
Furniture, fixtures and equipment
 
 
 
Fixed Assets
 
 
 
Fixed assets, useful life, minimum (in years)
 
 
Minimum |
Computer equipment
 
 
 
Fixed Assets
 
 
 
Fixed assets, useful life, minimum (in years)
 
 
Maximum
 
 
 
Revenue Recognition
 
 
 
Term of outsourcing contracts for benefit services (in years)
 
 
Term of outsourcing contracts for HR BPO services (in years)
10 
 
 
Cash and Cash Equivalents
 
 
 
Cash and cash equivalents, maturity period (in months)
 
 
Short-term Investments
 
 
 
Short-term investment, maturity period (in months/year)
 
 
Maximum |
Software
 
 
 
Fixed Assets
 
 
 
Fixed assets, useful life, maximum (in years)
 
 
Maximum |
Furniture, fixtures and equipment
 
 
 
Fixed Assets
 
 
 
Fixed assets, useful life, maximum (in years)
10 
 
 
Maximum |
Computer equipment
 
 
 
Fixed Assets
 
 
 
Fixed assets, useful life, maximum (in years)
 
 
Other Financial Data (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Other Income
 
 
 
Equity earnings
$ 7 
$ 18 
$ 18 
Realized (loss) gain on sale of investments
18 
(2)
(1)
(Loss) gain on disposal of businesses
 
(4)
13 
(Loss) gain on extinguishment of debt
(19)
(8)
Other
(1)
(4)
(1)
Other income
 
34 
Fixed Assets, net
 
 
 
Fixed assets, gross
1,971 
1,877 
 
Less: Accumulated depreciation
1,188 
1,096 
 
Fixed assets, net
783 
781 
 
Depreciation expense including software amortization
220 
151 
149 
Software
 
 
 
Fixed Assets, net
 
 
 
Fixed assets, gross
730 
662 
 
Leasehold improvements
 
 
 
Fixed Assets, net
 
 
 
Fixed assets, gross
407 
436 
 
Furniture, fixtures and equipment
 
 
 
Fixed Assets, net
 
 
 
Fixed assets, gross
326 
342 
 
Computer equipment
 
 
 
Fixed Assets, net
 
 
 
Fixed assets, gross
274 
245 
 
Land and buildings
 
 
 
Fixed Assets, net
 
 
 
Fixed assets, gross
108 
108 
 
Automobiles and aircraft
 
 
 
Fixed Assets, net
 
 
 
Fixed assets, gross
39 
39 
 
Construction in progress
 
 
 
Fixed Assets, net
 
 
 
Fixed assets, gross
$ 87 
$ 45 
 
Acquisitions and Dispositions (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended
Dec. 31, 2011
entity
Dec. 31, 2001
entity
Dec. 31, 2010
Dec. 31, 2011
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2010
Hewitt Associates, Inc (Hewitt)
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2011
Other acquisitions
Dec. 31, 2010
Other acquisitions
Dec. 31, 2011
HR Solutions
business
Business Acquisition
 
 
 
 
 
 
 
 
 
Number of business acquired under business combination
 
 
 
 
 
 
Consideration
$ 103 
 
$ 5,089 
 
 
$ 4,932 
$ 103 
$ 157 
 
Intangible assets:
 
 
 
 
 
 
 
 
 
Goodwill
 
 
 
50 
2,715 
2,765 
76 
59 
 
Other intangible assets
 
 
 
 
2,905 
 
33 
78 
 
Intangible assets
159 
 
5,757 
 
 
 
 
 
 
Future acquisition payments
 
 
$ 42 
 
 
 
 
 
 
Acquisitions and Dispositions (Details 2) (USD $)
Share data in Millions, except Per Share data, unless otherwise specified
1 Months Ended 12 Months Ended 1 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended 1 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Oct. 31, 2010
Cash Electing Consideration
D
Oct. 31, 2010
Stock Electing Consideration
D
Oct. 31, 2010
Hewitt Associates, Inc (Hewitt)
Y
Dec. 31, 2011
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2010
Hewitt Associates, Inc (Hewitt)
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2011
Hewitt Associates, Inc (Hewitt)
HR Solutions
Dec. 31, 2010
Hewitt Associates, Inc (Hewitt)
HR Solutions
Oct. 30, 2010
Hewitt Associates, Inc (Hewitt)
Cash Electing Consideration
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Cash Electing Consideration
Oct. 31, 2010
Hewitt Associates, Inc (Hewitt)
Mixed Consideration and Stock Electing Consideration
Sep. 30, 2010
Hewitt Associates, Inc (Hewitt)
Mixed Consideration and Stock Electing Consideration
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Mixed Consideration and Stock Electing Consideration
Oct. 30, 2010
Hewitt Associates, Inc (Hewitt)
Mixed Consideration Election
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Mixed Consideration Election
Oct. 30, 2010
Hewitt Associates, Inc (Hewitt)
Stock Electing Consideration
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Stock Electing Consideration
Business Acquisition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of aggregate consideration to be paid in cash and in number of shares each
 
 
 
 
 
 
 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
Par value of Hewitt Class A Common Stock per share (in dollars per share)
 
 
 
 
 
 
 
$ 0.01 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par value (in dollars per share)
$ 1 
$ 1 
 
 
 
 
 
$ 1.00 
 
 
 
 
 
 
 
 
 
 
 
Consecutive trading days
 
 
10 
10 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closing volume-weighted average price of Aon's common stock (in dollars per share)
 
 
 
 
 
 
 
 
 
 
$ 39.0545 
 
 
 
 
 
 
$ 39.0545 
 
Cash consideration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Hewitt common shares outstanding electing consideration
 
 
 
 
 
 
 
 
 
 
 
7.78 
 
 
 
 
44.52 
 
43.67 
Cash consideration per common share outstanding (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
$ 50.46 
 
 
 
 
$ 25.61 
 
$ 21.19 
Cash paid in business acquisition
 
 
 
 
 
 
 
$ 2,458,000,000 
 
 
 
$ 393,000,000 
 
 
 
 
$ 1,140,000,000 
 
$ 925,000,000 
Stock consideration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Hewitt common shares outstanding electing consideration
 
 
 
 
 
 
 
 
 
 
 
7.78 
 
 
 
 
44.52 
 
43.67 
Exchange ratio of Aon shares issued to Hewitt shareholders (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
63.62% 
 
74.94% 
Number of Aon common shares issued to finance Hewitt acquisition (in shares)
 
 
 
 
61.05 
 
 
 
 
 
 
 
 
61.05 
 
28.32 
 
32.73 
 
Aon's closing common share price (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
$ 39.28 
 
 
 
 
 
 
Total fair value of stock consideration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,398,000,000 
 
 
 
 
Fair value of Hewitt stock options converted to options to acquire Aon common stock
 
 
 
 
 
 
 
76,000,000 
 
 
 
 
 
 
 
 
 
 
 
Total consideration transferred
103,000,000 
5,089,000,000 
 
 
 
 
 
4,932,000,000 
 
 
 
 
 
 
 
 
 
 
 
Acquisition, integration and financing expenses
 
 
 
 
 
47,000,000 
54,000,000 
 
47,000,000 
19,000,000 
 
 
 
 
 
 
 
 
 
Acquisition, integration and financing cost recorded in Other General Expenses
 
 
 
 
 
47,000,000 
40,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition, integration and financing cost recorded in interest Expenses
 
 
 
 
 
 
14,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Financing of the Transaction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Drawing under Term Loan Credit Facility
 
 
 
 
 
 
 
1,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
Term of Term Loan Facility (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of Notes
 
 
 
 
 
 
 
$ 1,500,000,000 
 
 
 
 
 
 
 
 
 
 
 
Options issued as consideration to former holders of Hewitt stock options (in options)
 
 
 
 
4.5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions and Dispositions (Details 3) (USD $)
12 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2011
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2010
Hewitt Associates, Inc (Hewitt)
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2011
Hewitt Associates, Inc (Hewitt)
Customer relationships
Y
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Customer relationships
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Registered trademarks
Dec. 31, 2011
Hewitt Associates, Inc (Hewitt)
Technology
Y
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Technology
Business acquisition, purchase price allocation
 
 
 
 
 
 
 
 
 
 
Working capital
 
 
 
 
$ 348,000,000 
 
 
 
 
 
Property, equipment, and capitalized software
 
 
 
 
297,000,000 
 
 
 
 
 
Identifiable intangible assets
 
 
 
 
 
 
1,800,000,000 
890,000,000 
 
215,000,000 
Other non-current assets
 
 
 
 
344,000,000 
 
 
 
 
 
Long-term debt
 
 
 
 
346,000,000 
 
 
 
 
 
Other non-current liabilities
 
 
 
 
360,000,000 
 
 
 
 
 
Net deferred tax liability
 
 
 
 
1,021,000,000 
 
 
 
 
 
Net assets acquired
 
 
 
 
2,167,000,000 
 
 
 
 
 
Goodwill
 
 
50,000,000 
2,715,000,000 
2,765,000,000 
 
 
 
 
 
Total consideration transferred
103,000,000 
5,089,000,000 
 
 
4,932,000,000 
 
 
 
 
 
Other current assets
 
 
 
 
31,000,000 
 
 
 
 
 
Net deferred tax liability included in other non-current assets
 
 
 
 
30,000,000 
 
 
 
 
 
Other current liabilities
 
 
 
 
7,000,000 
 
 
 
 
 
Net deferred tax liability included in other non-current liabilities
 
 
 
 
$ 1,100,000,000 
 
 
 
 
 
Weighted average useful life (in years)
 
 
 
 
 
12 
 
 
 
Acquisitions and Dispositions (Details 4) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended 15 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2009
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2011
Hewitt Associates, Inc (Hewitt)
Operating income loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 2,994 
$ 2,723 
$ 2,811 
$ 2,759 
$ 2,909 
$ 1,801 
$ 1,898 
$ 1,904 
$ 11,287 
$ 8,512 
$ 7,595 
 
 
$ 791 
Operating Income
435 
341 
434 
396 
422 
263 
268 
273 
1,606 
1,226 
1,021 
 
 
23 
Amortization expense on intangible assets
 
 
 
 
 
 
 
 
362 
154 
93 
 
 
37 
Acquisition and transaction costs, pre-tax
 
 
 
 
 
 
 
 
 
 
 
 
 
18 
Restructuring expenses, pre-tax
 
 
 
 
 
 
 
 
 
 
 
 
 
52 
Pro Forma Impact of the Transaction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
10,831 
10,669 
 
Net income attributable to Aon stockholders
 
 
 
 
 
 
 
 
 
 
 
736 
758 
 
Earnings per Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
$ 2.17 
$ 2.20 
 
Diluted (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
$ 2.14 
$ 2.15 
 
Elimination of Hewitt's historical intangible asset amortization expense
 
 
 
 
 
 
 
 
 
 
 
16 
20 
 
Additional amortization expense related to the fair value of intangible assets acquired
 
 
 
 
 
 
 
 
 
 
 
293 
218 
 
Additional interest expense associated with the incremental debt issued by the entity to partially finance the acquisition
 
 
 
 
 
 
 
 
 
 
 
43 
77 
 
Elimination of deferred revenues
 
 
 
 
 
 
 
 
 
 
 
21 
28 
 
Elimination of deferred costs
 
 
 
 
 
 
 
 
 
 
 
16 
22 
 
Additional expense related to unfavorable lease obligations
 
 
 
 
 
 
 
 
 
 
 
15 
15 
 
Elimination of Hewitt's equity based compensation expense
 
 
 
 
 
 
 
 
 
 
 
46 
54 
 
Elimination of acquisition related costs
 
 
 
 
 
 
 
 
 
 
 
$ 49 
 
 
Combined statutory federal and state tax rate
 
 
 
 
 
 
 
 
 
 
 
38.00% 
38.00% 
 
Acquisitions and Dispositions (Details 5) (USD $)
12 Months Ended
Dec. 31, 2011
business
Dec. 31, 2010
entity
Dec. 31, 2009
entity
Dispositions
 
 
 
Number of dispositions
 
 
Total pretax gains (loss)
 
$ (4,000,000)
$ 13,000,000 
Total pretax gains (loss)
 
 
$ 15,000,000 
Risk Solutions
 
 
 
Dispositions
 
 
 
Number of dispositions
HR Solutions
 
 
 
Dispositions
 
 
 
Number of dispositions
 
 
Acquisitions and Dispositions (Details 6) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Jun. 30, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2009
AIS Management Corporation
Dec. 31, 2008
AIS Management Corporation
Dec. 31, 2011
Other discontinued operations
Dec. 31, 2010
Other discontinued operations
Dec. 31, 2009
Other discontinued operations
Discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from the sale of discontinued operation
 
 
 
 
 
 
 
 
$ 120 
 
 
 
Disposition, potential contingent consideration
 
 
 
 
 
 
 
 
35 
 
 
 
Disposition, Contingent consideration, period of time following the sale (in years)
 
 
 
 
 
 
 
 
Two 
 
 
 
Net (loss) income :
 
 
 
 
 
 
 
 
 
 
 
 
Operations
 
 
 
 
 
 
 
 
 
 
Gain (loss) on sale
 
 
 
 
(39)
78 
86 
 
(39)
(8)
Total pretax gain (loss)
 
 
 
 
(39)
83 
 
 
 
 
 
Operations
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) on sale
 
 
 
 
(27)
108 
 
 
 
 
 
Net (loss) income
(1)
(26)
(27)
111 
 
 
 
 
 
Expense for the settlement of legacy litigation
 
 
 
 
 
 
 
 
 
 
$ 38 
 
Goodwill and Other Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Changes in the net carrying amount of goodwill by operating segment (in millions)
 
 
Balance at the beginning of the period
$ 8,647 
$ 6,078 
Goodwill related to acquisitions
77 
2,715 
Goodwill related to other current year acquisition
 
59 
Goodwill related to disposals
(2)
(2)
Goodwill related to hewitt acquisitions
50 
 
Goodwill related to other prior year acquisitions
 
Foreign currency revaluation
(3)
(203)
Balance at the end of the period
8,770 
8,647 
Risk Solutions
 
 
Changes in the net carrying amount of goodwill by operating segment (in millions)
 
 
Balance at the beginning of the period
5,549 
5,693 
Goodwill related to acquisitions
73 
 
Goodwill related to other current year acquisition
 
50 
Goodwill related to disposals
(2)
(2)
Transfers
(83)
 
Foreign currency revaluation
20 
(192)
Balance at the end of the period
5,557 
5,549 
HR Solutions
 
 
Changes in the net carrying amount of goodwill by operating segment (in millions)
 
 
Balance at the beginning of the period
3,098 
385 
Goodwill related to acquisitions
2,715 
Goodwill related to other current year acquisition
 
Goodwill related to hewitt acquisitions
50 
 
Goodwill related to other prior year acquisitions
 
Transfers
83 
 
Foreign currency revaluation
(23)
(11)
Balance at the end of the period
$ 3,213 
$ 3,098 
Goodwill and Other Intangible Assets (Details 2) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Intangible assets with indefinite lives
 
 
 
Trademarks
$ 1,024 
$ 1,024 
 
Intangible assets with finite lives
 
 
 
Intangible assets with finite lives, accumulated amortization
966 
627 
 
Intangible assets with finite lives, gross carrying amount
4,242 
4,238 
 
Intangible assets, net
3,276 
3,611 
 
Amortization expense on intangible assets
362 
154 
93 
Estimated amortization for intangible assets
 
 
 
2012
411 
 
 
2013
384 
 
 
2014
334 
 
 
2015
289 
 
 
2016
245 
 
 
Thereafter
589 
 
 
Estimated future amortization for intangible assets
2,252 
 
 
HR Solutions
 
 
 
Estimated amortization for intangible assets
 
 
 
2012
294 
 
 
2013
275 
 
 
2014
239 
 
 
2015
208 
 
 
2016
174 
 
 
Thereafter
468 
 
 
Estimated future amortization for intangible assets
1,658 
 
 
Risk Solutions
 
 
 
Estimated amortization for intangible assets
 
 
 
2012
117 
 
 
2013
109 
 
 
2014
95 
 
 
2015
81 
 
 
2016
71 
 
 
Thereafter
121 
 
 
Estimated future amortization for intangible assets
594 
 
 
Trademarks
 
 
 
Intangible assets with finite lives
 
 
 
Intangible assets with finite lives, accumulated amortization
 
 
Intangible assets with finite lives, gross carrying amount
 
Intangible assets, net
 
Customer related and contract based
 
 
 
Intangible assets with finite lives
 
 
 
Intangible assets with finite lives, accumulated amortization
615 
344 
 
Intangible assets with finite lives, gross carrying amount
2,608 
2,605 
 
Intangible assets, net
1,993 
2,261 
 
Marketing technology and other
 
 
 
Intangible assets with finite lives
 
 
 
Intangible assets with finite lives, accumulated amortization
350 
283 
 
Intangible assets with finite lives, gross carrying amount
606 
606 
 
Intangible assets, net
$ 256 
$ 323 
 
Restructuring (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 1 Months Ended 12 Months Ended
Dec. 31, 2011
Aon Hewitt Restructuring Plan
Dec. 31, 2010
Aon Hewitt Restructuring Plan
Dec. 31, 2011
Aon Hewitt Restructuring Plan
Risk Solutions
Dec. 31, 2011
Aon Hewitt Restructuring Plan
HR Solutions
Dec. 31, 2010
Aon Hewitt Restructuring Plan
HR Solutions
Dec. 31, 2011
Aon Hewitt Restructuring Plan
Workforce reduction
job
Dec. 31, 2010
Aon Hewitt Restructuring Plan
Workforce reduction
Oct. 31, 2010
Aon Hewitt Restructuring Plan
Workforce reduction
Minimum
job
Oct. 31, 2010
Aon Hewitt Restructuring Plan
Workforce reduction
Maximum
job
Dec. 31, 2011
Aon Hewitt Restructuring Plan
Lease consolidation
Dec. 31, 2010
Aon Hewitt Restructuring Plan
Lease consolidation
Dec. 31, 2011
Aon Hewitt Restructuring Plan
Asset impairments
Dec. 31, 2011
Aon Hewitt Restructuring Plan
Other costs associated with restructuring
Dec. 31, 2011
Aon Hewitt Restructuring Plan
Real estate lease realization
Dec. 31, 2011
Aon Benfield Restructuring Plan
Dec. 31, 2010
Aon Benfield Restructuring Plan
Dec. 31, 2009
Aon Benfield Restructuring Plan
Dec. 31, 2008
Aon Benfield Restructuring Plan
Original Estimate
Y
Dec. 31, 2009
Aon Benfield Restructuring Plan
Adjustment
Dec. 31, 2011
Aon Benfield Restructuring Plan
Current Estimate
Dec. 31, 2011
Aon Benfield Restructuring Plan
Workforce reduction
job
Dec. 31, 2010
Aon Benfield Restructuring Plan
Workforce reduction
Dec. 31, 2009
Aon Benfield Restructuring Plan
Workforce reduction
Dec. 31, 2008
Aon Benfield Restructuring Plan
Workforce reduction
job
Dec. 31, 2011
Aon Benfield Restructuring Plan
Lease consolidation
Dec. 31, 2010
Aon Benfield Restructuring Plan
Lease consolidation
Dec. 31, 2009
Aon Benfield Restructuring Plan
Lease consolidation
Dec. 31, 2011
Aon Benfield Restructuring Plan
Asset impairments
Dec. 31, 2010
Aon Benfield Restructuring Plan
Asset impairments
Dec. 31, 2009
Aon Benfield Restructuring Plan
Asset impairments
Dec. 31, 2011
Aon Benfield Restructuring Plan
Other costs associated with restructuring
Dec. 31, 2010
Aon Benfield Restructuring Plan
Other costs associated with restructuring
Dec. 31, 2009
Aon Benfield Restructuring Plan
Other costs associated with restructuring
Dec. 31, 2011
2007 Restructuring Plan
Dec. 31, 2010
2007 Restructuring Plan
Dec. 31, 2009
2007 Restructuring Plan
Dec. 31, 2008
2007 Restructuring Plan
Dec. 31, 2007
2007 Restructuring Plan
Dec. 31, 2011
2007 Restructuring Plan
Risk Solutions
Dec. 31, 2010
2007 Restructuring Plan
Risk Solutions
Dec. 31, 2009
2007 Restructuring Plan
Risk Solutions
Dec. 31, 2008
2007 Restructuring Plan
Risk Solutions
Dec. 31, 2007
2007 Restructuring Plan
Risk Solutions
Dec. 31, 2011
2007 Restructuring Plan
HR Solutions
Dec. 31, 2010
2007 Restructuring Plan
HR Solutions
Dec. 31, 2009
2007 Restructuring Plan
HR Solutions
Dec. 31, 2008
2007 Restructuring Plan
HR Solutions
Dec. 31, 2007
2007 Restructuring Plan
HR Solutions
Dec. 31, 2011
2007 Restructuring Plan
Workforce reduction
job
Dec. 31, 2010
2007 Restructuring Plan
Workforce reduction
Dec. 31, 2009
2007 Restructuring Plan
Workforce reduction
Dec. 31, 2008
2007 Restructuring Plan
Workforce reduction
Dec. 31, 2007
2007 Restructuring Plan
Workforce reduction
Dec. 31, 2011
2007 Restructuring Plan
Lease consolidation
Dec. 31, 2010
2007 Restructuring Plan
Lease consolidation
Dec. 31, 2009
2007 Restructuring Plan
Lease consolidation
Dec. 31, 2008
2007 Restructuring Plan
Lease consolidation
Dec. 31, 2007
2007 Restructuring Plan
Lease consolidation
Dec. 31, 2011
2007 Restructuring Plan
Asset impairments
Dec. 31, 2010
2007 Restructuring Plan
Asset impairments
Dec. 31, 2009
2007 Restructuring Plan
Asset impairments
Dec. 31, 2008
2007 Restructuring Plan
Asset impairments
Dec. 31, 2007
2007 Restructuring Plan
Asset impairments
Dec. 31, 2011
2007 Restructuring Plan
Other costs associated with restructuring
Dec. 31, 2010
2007 Restructuring Plan
Other costs associated with restructuring
Dec. 31, 2009
2007 Restructuring Plan
Other costs associated with restructuring
Dec. 31, 2008
2007 Restructuring Plan
Other costs associated with restructuring
Dec. 31, 2007
2007 Restructuring Plan
Other costs associated with restructuring
Restructuring and Related Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of jobs eliminated to date under the plan
 
 
 
 
 
1,080 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
785 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,700 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of jobs expected to be eliminated under the plan
 
 
 
 
 
 
 
1,500 
1,800 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated additional restructuring costs to be recorded in future earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 7 
 
 
$ 81 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges paid total to date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
129 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase price allocation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
53 
 
 
104 
(49)
53 
32 
 
 
 
20 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and related charges
105 
52 
15 
90 
52 
64 
49 
 
 
32 
 
19 
26 
55 
 
 
 
33 
15 
38 
 
(15)
14 
 
(11)
94 
357 
251 
46 
(10)
84 
322 
234 
41 
(1)
10 
35 
17 
(2)
72 
251 
166 
17 
(9)
15 
78 
38 
22 
 
15 
18 
 
13 
29 
Restructuring charges total to date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
153 
 
 
 
 
 
118 
 
 
 
26 
 
 
 
 
 
 
737 
 
 
 
 
671 
 
 
 
 
66 
 
 
 
 
504 
 
 
 
 
144 
 
 
 
 
39 
 
 
 
 
50 
 
 
 
 
Estimated Total Cost for Restructuring Period
$ 325 
 
$ 28 
$ 297 
 
$ 180 
 
 
 
$ 95 
 
$ 47 
$ 3 
$ 145 
$ 160 
 
 
$ 185 
 
$ 160 
$ 125 
 
 
 
$ 26 
 
 
$ 4 
 
 
$ 5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period over which the expected cost will be incurred (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring (Details 2) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Restructuring Reserve
 
 
 
Beginning balance
$ 237 
$ 263 
$ 233 
Assumed Hewitt restructuring liability
 
43 
 
Expensed
106 
168 
394 
Cash payments
(178)
(232)
(327)
Purchase accounting adjustment
 
 
(49)
Foreign exchange translation and other
(5)
12 
Ending balance
173 
237 
263 
Aon Hewitt Restructuring Plan
 
 
 
Restructuring Reserve
 
 
 
Beginning balance
88 
 
 
Assumed Hewitt restructuring liability
 
43 
 
Expensed
98 
52 
 
Cash payments
(93)
(8)
 
Foreign exchange translation and other
 
Ending balance
95 
88 
 
Aon Benfield Restructuring Plan
 
 
 
Restructuring Reserve
 
 
 
Beginning balance
26 
45 
104 
Expensed
19 
24 
53 
Cash payments
(24)
(38)
(67)
Purchase accounting adjustment
 
 
(49)
Foreign exchange translation and other
(1)
(5)
Ending balance
20 
26 
45 
2007 Restructuring Plan
 
 
 
Restructuring Reserve
 
 
 
Beginning balance
113 
202 
101 
Expensed
(11)
92 
342 
Cash payments
(59)
(178)
(248)
Foreign exchange translation and other
(3)
Ending balance
50 
113 
202 
Other Restructuring Plan
 
 
 
Restructuring Reserve
 
 
 
Beginning balance
10 
16 
28 
Expensed
 
 
(1)
Cash payments
(2)
(8)
(12)
Foreign exchange translation and other
 
Ending balance
$ 8 
$ 10 
$ 16 
Investments (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2008
Interest-bearing Assets
 
 
 
 
Cash and cash equivalents
$ 272 
$ 346 
$ 217 
$ 582 
Short-term investments
785 
785 
 
 
Fiduciary assets
4,190 
3,489 
 
 
Investments
239 
312 
 
 
Total interest-bearing assets
5,486 
4,932 
 
 
Investments:
 
 
 
 
Equity method investments
164 
174 
 
 
Other investments, at cost
60 
123 
 
 
Fixed-maturity securities
15 
15 
 
 
Investments
239 
312 
 
 
Juniperus Insurance Opportunity Fund Limited (Juniperus)
 
 
 
 
Variable Interest Entity
 
 
 
 
Investment in variable interest entity
$ 65.0 
 
 
 
Debt (Details)
12 Months Ended 1 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 1 Months Ended 12 Months Ended 3 Months Ended
Dec. 31, 2011
USD ($)
Dec. 31, 2010
USD ($)
Dec. 31, 2009
USD ($)
Dec. 31, 2010
Private Equity Partnership Structures I, LLC (PEPS I)
USD ($)
Dec. 31, 2010
Hewitt Associates, Inc (Hewitt)
USD ($)
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
USD ($)
Jul. 31, 2009
2005 Facility
USD ($)
Oct. 31, 2010
Euro Facility
Dec. 31, 2011
Euro Facility
USD ($)
Oct. 15, 2010
Euro Facility
EUR (€)
Dec. 31, 2009
U.S. committed bank credit facility
USD ($)
Y
Dec. 31, 2009
Commercial paper and other short-term borrowings facility
USD ($)
Y
Jun. 30, 2011
2011 Term loan credit facility
Dec. 31, 2011
2011 Term loan credit facility
USD ($)
Jun. 15, 2011
2011 Term loan credit facility
USD ($)
Dec. 31, 2011
3.125% Senior notes due 2016
USD ($)
May 24, 2011
3.125% Senior notes due 2016
USD ($)
Dec. 31, 2011
4.76% CAD 375 senior unsecured debt securities due March 2018
USD ($)
Mar. 8, 2011
4.76% CAD 375 senior unsecured debt securities due March 2018
CAD ($)
Aug. 31, 2010
2010 Term loan credit facility
Y
Dec. 31, 2011
2010 Term loan credit facility
USD ($)
Dec. 31, 2010
2010 Term loan credit facility
USD ($)
Aug. 13, 2010
2010 Term loan credit facility
USD ($)
Oct. 30, 2010
2010 Term loan credit facility
Hewitt Associates, Inc (Hewitt)
USD ($)
Dec. 31, 2011
8.205% Junior subordinated deferrable interest debentures due January 2027
USD ($)
Dec. 31, 2010
8.205% Junior subordinated deferrable interest debentures due January 2027
USD ($)
Dec. 31, 2011
6.25% EUR 500 debt securities due July 2014
USD ($)
Dec. 31, 2010
6.25% EUR 500 debt securities due July 2014
USD ($)
Jul. 2, 2009
6.25% EUR 500 debt securities due July 2014
USD ($)
Jul. 2, 2009
6.25% EUR 500 debt securities due July 2014
EUR (€)
Dec. 31, 2011
5.00% Senior notes due September 2020
USD ($)
Dec. 31, 2010
5.00% Senior notes due September 2020
USD ($)
Sep. 7, 2010
5.00% Senior notes due September 2020
USD ($)
Dec. 31, 2011
3.50% senior notes due September 2015
USD ($)
Dec. 31, 2010
3.50% senior notes due September 2015
USD ($)
Sep. 7, 2010
3.50% senior notes due September 2015
USD ($)
Apr. 30, 2011
5.05% CAD 375 debt securities due April 2011
CAD ($)
Dec. 31, 2010
5.05% CAD 375 debt securities due April 2011
USD ($)
Dec. 31, 2010
5.05% CAD 375 debt securities due April 2011
CAD ($)
Dec. 31, 2011
6.25% Senior notes due September 2040
USD ($)
Dec. 31, 2010
6.25% Senior notes due September 2040
USD ($)
Sep. 7, 2010
6.25% Senior notes due September 2040
USD ($)
Dec. 31, 2011
7.375% Debt securities due December 2012
USD ($)
Dec. 31, 2010
7.375% Debt securities due December 2012
USD ($)
Dec. 31, 2011
Notes
USD ($)
Sep. 7, 2010
Notes
USD ($)
Dec. 31, 2011
Other
USD ($)
Dec. 31, 2010
Other
USD ($)
Oct. 2, 2010
Senior Notes
Hewitt Associates, Inc (Hewitt)
USD ($)
Sep. 30, 2010
Bridge Loan Facility
USD ($)
Aug. 13, 2010
Bridge Loan Facility
USD ($)
Dec. 31, 2011
Commercial paper
USD ($)
Debt Instrument
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt face value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 450,000,000 
 
$ 500,000,000 
 
$ 375,000,000 
 
 
 
 
 
 
 
 
 
$ 653,000,000 
€ 500,000,000 
 
 
$ 600,000,000 
 
 
$ 600,000,000 
 
 
$ 375,000,000 
 
 
$ 300,000,000 
 
 
 
 
 
 
 
 
 
 
Interest rate on debt (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.125% 
3.125% 
4.76% 
4.76% 
 
 
 
 
 
8.205% 
 
6.25% 
 
6.25% 
6.25% 
5.00% 
 
5.00% 
3.50% 
3.50% 
3.50% 
 
5.05% 
5.05% 
6.25% 
 
6.25% 
7.375% 
 
 
 
 
 
 
 
 
 
Total debt
4,492,000,000 
4,506,000,000 
 
 
 
 
 
 
 
 
 
 
 
428,000,000 
 
500,000,000 
 
368,000,000 
 
 
 
975,000,000 
 
 
687,000,000 
687,000,000 
653,000,000 
667,000,000 
 
 
598,000,000 
598,000,000 
 
597,000,000 
597,000,000 
 
 
372,000,000 
 
297,000,000 
297,000,000 
 
225,000,000 
225,000,000 
 
 
139,000,000 
88,000,000 
 
 
 
50,000,000 
Less short-term and current portion of long-term debt
337,000,000 
492,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total long-term debt
4,155,000,000 
4,014,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New credit and loan facility
 
 
 
 
 
 
 
 
849,000,000 
650,000,000 
 
400,000,000 
 
 
 
 
 
 
 
 
 
 
1,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,500,000,000 
 
Deferred financing cost amortization for Term Loan Credit Facility and Notes
 
 
 
 
 
 
 
 
 
 
 
 
 
2,000,000 
 
 
 
 
 
 
 
 
26,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12,000,000 
 
 
 
 
 
 
Deferred financing costs expense
 
 
 
 
14,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14,000,000 
 
 
(Loss) gain on extinguishment of debt
19,000,000 
8,000,000 
(5,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt assumed on acquisition
 
 
 
 
 
346,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
299,000,000 
 
 
 
Carrying value of debt related to hedging activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount borrowed under five-year multi-currency foreign credit facility (""Euro credit facility"")
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commitment fees (in basis points)
 
 
 
 
 
 
 
87.50% 
 
 
 
0.35% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt repayment
 
 
 
 
 
 
677,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
375,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term of credit facility (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cancellation of credit facility
 
 
 
 
 
 
 
 
 
 
600,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annualized interest rate including LIBOR (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
1.67% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument base interest rate
 
 
 
 
 
 
 
 
 
 
 
 
LIBOR 
LIBOR 
 
 
 
 
 
LIBOR 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Variable Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
13.80% 
1.38% 
 
 
 
 
 
 
 
2.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repurchase of debt held by PEPS I
 
 
 
47,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred financing cost amortization
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 2,000,000 
 
 
 
 
 
 
 
Debt (Details 2) (USD $)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2009
Dec. 31, 1997
Dec. 31, 2011
Aon Capital A
 
 
 
Debt Instrument
 
 
 
Percentage of common equity in trust (as a percent)
 
100.00% 
 
Interest rate on debt (as a percent)
 
8.205% 
 
Face value of repurchased Capital Securities
$ 15 
 
 
Repurchase of Capital Securities
10 
 
 
Gain on repurchase of Capital Securities
 
 
Equity investments exchanged for debentures
24 
 
 
Debentures cancelled amount
24 
 
 
Debentures outstanding
 
 
$ 687 
8.205% Junior subordinated deferrable interest debentures due January 2027
 
 
 
Debt Instrument
 
 
 
Interest rate on debt (as a percent)
 
 
8.205% 
Debt (Details 3) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2011
US and Euro Line of Credit Facility
Debt Instrument
 
 
 
 
High-end adjustment limit of non-recurring cash charges
 
 
 
$ 50 
Numerator for ratio of consolidated EBITDA less transaction costs to consolidated cash interest expense
 
 
 
Denominator for ratio of consolidated EBITDA less transaction costs to consolidated cash interest expense
 
 
 
Numerator for the ratio of consolidated indebtedness to consolidated EBITDA, maximum
 
 
 
Denominator for the ratio of consolidated indebtedness to consolidated EBITDA, maximum
 
 
 
Repayments of long-term debt
 
 
 
 
2012
337 
 
 
 
2013
404 
 
 
 
2014
673 
 
 
 
2015
612 
 
 
 
2016
509 
 
 
 
Thereafter
1,957 
 
 
 
Total long-term debt
$ 4,492 
 
 
 
Weighted-average interest rates (as a percent)
0.50% 
0.70% 
1.50% 
 
Lease Commitments (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Lease Commitments
 
 
 
Percentage of Aon's lease obligations for the use of office space
88.00% 
 
 
Rental expenses for operating leases
 
 
 
Rental expense
$ 525 
$ 429 
$ 346 
Sub lease rental income
71 
57 
52 
Net rental expense
454 
372 
294 
Future minimum rental payments under operating leases
 
 
 
2012
395 
 
 
2013
373 
 
 
2014
334 
 
 
2015
296 
 
 
2016
257 
 
 
Thereafter
984 
 
 
Total minimum payments required
$ 2,639 
 
 
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Income from continuing operations before income taxes:
 
 
 
U.S.
$ 301 
$ 21 
$ 215 
International
1,083 
1,038 
734 
Income from continuing operations before income taxes
1,384 
1,059 
949 
Current:
 
 
 
U.S. federal
(17)
16 
32 
U.S. state and local
35 
10 
23 
International
217 
202 
150 
Total current
235 
228 
205 
Deferred:
 
 
 
U.S. federal
109 
47 
49 
U.S. state and local
14 
13 
International
20 
12 
Total deferred
143 
72 
63 
Total income taxes expenses
$ 378 
$ 300 
$ 268 
Income Taxes (Details 2)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Reconciliation of the income tax provisions based on the U.S. statutory corporate tax rate to the provisions reflected in the Consolidated Financial Statements
 
 
 
Statutory tax rate
35.00% 
35.00% 
35.00% 
State income taxes, net of federal benefit
2.30% 
1.10% 
2.00% 
Taxes on international operations
(11.50%)
(12.50%)
(12.00%)
Nondeductible expenses
3.50% 
3.90% 
3.40% 
Adjustments to prior year tax requirements
(1.10%)
0.50% 
0.10% 
Deferred tax adjustments, including statutory rate changes
(0.80%)
0.20% 
0.10% 
Other-net
(0.10%)
0.20% 
(0.40%)
Effective tax rate
27.30% 
28.40% 
28.20% 
Income Taxes (Details 3) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Deferred tax assets:
 
 
Employee benefit plans
$ 940 
$ 929 
Net operating loss and tax credit carryforwards
484 
430 
Other accrued expenses
154 
161 
Investment basis differences
17 
17 
Other
100 
66 
Gross deferred tax assets
1,695 
1,603 
Valuation allowance on deferred tax assets
(219)
(257)
Total
1,476 
1,346 
Deferred tax liabilities:
 
 
Intangibles
(1,333)
(1,420)
Deferred revenue
(83)
(49)
Other accrued expenses
(121)
(41)
Unrealized investment gains
(21)
(5)
Unrealized foreign exchange gains
(23)
(23)
Other
(40)
(75)
Total
(1,621)
(1,613)
Net deferred tax (liability) asset
$ (145)
$ (267)
Income Taxes (Details 4) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Deferred income taxes
 
 
 
Deferred tax assets - current
$ 19,000,000 
$ 121,000,000 
 
Deferred tax assets - non-current
258,000,000 
305,000,000 
 
Deferred tax liabilities - current
(121,000,000)
(30,000,000)
 
Deferred tax liabilities - non-current
(301,000,000)
(663,000,000)
 
Net deferred tax (liability) asset
(145,000,000)
(267,000,000)
 
Valuation allowance
 
 
 
Increase (Decrease) in valuation allowance
(35,000,000)
 
 
Adjustment to additional paid-in-capital, income tax benefits attributable to employee stock compensation
36,000,000 
20,000,000 
25,000,000 
Unremitted foreign earnings
3,000,000,000 
 
 
U.S. foreign tax credit carryforwards
 
 
 
Valuation allowance
 
 
 
Increase (Decrease) in valuation allowance
(24,000,000)
 
 
German interest expense carryforward
 
 
 
Valuation allowance
 
 
 
Increase (Decrease) in valuation allowance
7,000,000 
 
 
U.K. capital loss carryforwards
 
 
 
Valuation allowance
 
 
 
Increase (Decrease) in valuation allowance
$ (13,000,000)
 
 
Income Taxes (Details 5) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Federal
 
Operating and capital loss carryforwards
 
Operating loss carryforwards
$ 37 
State
 
Operating and capital loss carryforwards
 
Operating loss carryforwards
622 
Foreign
 
Operating and capital loss carryforwards
 
Operating loss carryforwards
886 
Capital loss carryforwards
$ 314 
Income Taxes (Details 6) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Reconciliation of the Company's beginning and ending amount of unrecognized tax benefits
 
 
 
Balance at the beginning of the period
$ 100 
$ 77 
 
Additions based on tax positions related to the current year
 
Additions for tax positions of prior years
 
Reductions for tax positions of prior years
(16)
(7)
 
Settlements
(15)
(1)
 
Lapse of statute of limitations
(4)
(5)
 
Acquisitions
40 
26 
 
Foreign currency translation
 
(1)
 
Balance at the end of the period
118 
100 
 
Unrecognized tax benefits that would impact effective tax rate
116 
 
 
Maximum
 
 
 
Unrecognized Tax Provisions
 
 
 
Accrued potential penalties
Accrued interest
 
Liability recorded for penalties
 
Liability recorded for interest
$ 17 
$ 18 
 
Stockholders' Equity (Details) (USD $)
1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 3 Months Ended
Dec. 31, 2010
Dec. 31, 2011
entity
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2001
entity
Dec. 31, 2011
Continuing operations
Dec. 31, 2010
Continuing operations
Dec. 31, 2009
Continuing operations
Dec. 31, 2009
Discontinued operations
Oct. 31, 2010
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2011
Hewitt Associates, Inc (Hewitt)
Dec. 31, 2010
Hewitt Associates, Inc (Hewitt)
Oct. 2, 2010
Hewitt Associates, Inc (Hewitt)
Jan. 31, 2010
2010 - Share Repurchase Program
Dec. 31, 2011
2010 - Share Repurchase Program
Dec. 31, 2011
2005 - Share Repurchase Program
Mar. 31, 2011
2005 - Share Repurchase Program
Authorized Shares Adjustment
Dec. 31, 2007
2005 - Share Repurchase Program
Authorized Shares Adjustment
Common Stock Programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock shares issued as consideration for part of the purchase price of Hewitt
 
 
 
 
 
 
 
 
 
61,050,000 
 
 
 
 
 
 
 
 
Option to purchase common stock
 
 
 
 
 
 
 
 
 
 
 
 
4,500,000 
 
 
 
 
 
Options outstanding
 
 
 
 
 
 
 
 
 
 
 
 
1,200,000 
 
 
 
 
 
Options exercisable
 
 
 
 
 
 
 
 
 
 
 
 
1,200,000 
 
 
 
 
 
Share repurchase authorization limit (in dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 2,000,000,000 
$ 1,200,000,000 
 
 
$ 4,600,000,000 
Number of shares repurchased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16,400,000 
 
118,700,000 
 
Average price per share of shares purchased under share repurchase program (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 50.39 
 
$ 40.97 
 
Cost of shares repurchased (in dollars)
 
828,000,000 
250,000,000 
590,000,000 
 
 
 
 
 
 
 
 
 
 
827,000,000 
 
4,600,000,000 
 
Cumulative number of shares purchased under share repurchase programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
128,300,000 
 
 
Cumulative value of shares purchased under share repurchase programs (in dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,400,000,000 
 
 
Number of treasury shares reissued for employee benefit plans
 
7,800,000 
8,500,000 
8,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Treasury stock shares retired
40,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of entities acquired that returned shares of Aon common stock upon acquisition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aon shares obtained upon acquisition of controlled entities
 
 
 
 
22,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of treasury shares reissued for employee stock purchase plans
 
600,000 
400,000 
500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares for basic earnings per share
 
335,500,000 
293,400,000 
283,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Potentially issuable common shares (in shares)
 
5,400,000 
4,700,000 
7,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares for diluted earnings per share
 
340,900,000 
298,100,000 
291,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of participating securities (in shares)
 
7,600,000 
6,100,000 
6,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares excluded from the calculation of diluted earnings per share
 
100,000 
4,800,000 
4,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$ 13,000,000 
$ 15,000,000 
$ 18,000,000 
 
$ 13,000,000 
$ 15,000,000 
$ 15,000,000 
$ (3,000,000)
 
 
 
 
 
 
 
 
 
Number of shares issued for employee benefit plans
 
500,000 
2,200,000 
1,000,000 
 
 
 
 
 
 
2,200,000 
500,000 
 
 
 
 
 
 
Stockholders' Equity (Details 2) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
Dividends to stockholders
 
 
 
 
 
 
 
 
$ 200 
$ 175 
$ 165 
Cash dividends per share paid on common stock (in dollars per share)
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.60 
$ 0.60 
$ 0.60 
Other comprehensive income (loss), pretax
 
 
 
 
 
 
 
 
 
 
 
Net derivative gains arising during the year, pretax
 
 
 
 
 
 
 
 
(44)
(31)
11 
Reclassification adjustment, pretax
 
 
 
 
 
 
 
 
25 
(5)
10 
Net change in derivative gains (losses), pretax
 
 
 
 
 
 
 
 
(19)
(36)
21 
Decrease in unrealized gains/losses, pretax
 
 
 
 
 
 
 
 
 
 
(17)
Reclassification adjustment, pretax
 
 
 
 
 
 
 
 
 
 
(2)
Net change in unrealized investment losses, pretax
 
 
 
 
 
 
 
 
 
 
(19)
Net foreign exchange translation adjustments, pretax
 
 
 
 
 
 
 
 
(46)
(92)
198 
Net post-retirement benefit obligation, pretax
 
 
 
 
 
 
 
 
(593)
(76)
(583)
Total other comprehensive loss, pretax
 
 
 
 
 
 
 
 
(658)
(204)
(383)
Less: other comprehensive income attributable to noncontrolling interest, pretax
 
 
 
 
 
 
 
 
(2)
Other comprehensive loss attributable to Aon stockholders, pretax
 
 
 
 
 
 
 
 
(659)
(202)
(387)
Other comprehensive income (loss), income tax benefit (expense)
 
 
 
 
 
 
 
 
 
 
 
Net derivative gains arising during the year, income tax benefit (expense)
 
 
 
 
 
 
 
 
15 
10 
(4)
Reclassification adjustment, income tax benefit (expense)
 
 
 
 
 
 
 
 
(9)
(4)
Net change in derivative gains, income tax benefit (expense)
 
 
 
 
 
 
 
 
12 
(8)
Decrease in unrealized gains/losses, income tax benefit (expense)
 
 
 
 
 
 
 
 
 
 
Reclassification adjustment, income tax benefit (expense)
 
 
 
 
 
 
 
 
 
 
Net change in unrealized investment losses, income tax benefit (expense)
 
 
 
 
 
 
 
 
 
 
Net foreign exchange translation adjustments, income tax benefit (expense)
 
 
 
 
 
 
 
 
(43)
Net post-retirement benefit obligation, income tax benefit (expense)
 
 
 
 
 
 
 
 
197 
35 
170 
Total other comprehensive loss, income tax benefit (expense)
 
 
 
 
 
 
 
 
206 
174 
Other comprehensive loss attributable to Aon stockholders, income tax benefit (expense)
 
 
 
 
 
 
 
 
206 
174 
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
Net derivative gains arising during the year, net of tax
 
 
 
 
 
 
 
 
(29)
(21)
Reclassification adjustment, net of tax
 
 
 
 
 
 
 
 
16 
(3)
Net change in derivative gains, net of tax
 
 
 
 
 
 
 
 
(13)
(24)
13 
Decrease in unrealized gains/losses, net of tax
 
 
 
 
 
 
 
 
 
 
(11)
Reclassification adjustment, net of tax
 
 
 
 
 
 
 
 
 
 
(1)
Net change in unrealized investment losses, net of tax
 
 
 
 
 
 
 
 
 
 
(12)
Net foreign exchange translation adjustments, net of tax
 
 
 
 
 
 
 
 
(43)
(135)
203 
Net post-retirement benefit obligation, net of tax
 
 
 
 
 
 
 
 
(396)
(41)
(413)
Total other comprehensive loss, net of tax
 
 
 
 
 
 
 
 
(452)
(200)
(209)
Less: other comprehensive income attributable to noncontrolling interest, net of tax
 
 
 
 
 
 
 
 
(2)
Other comprehensive loss attributable to Aon stockholders, net of tax
 
 
 
 
 
 
 
 
$ (453)
$ (198)
$ (213)
Stockholders' Equity (Details 3) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Accumulated other comprehensive loss:
 
 
 
Net derivative losses
$ (37)
$ (24)
 
Net unrealized investment gains
 
 
44 
Net foreign currency exchange translation adjustments
124 
168 
301 
Net post-retirement benefit obligations
(2,457)
(2,061)
(2,020)
Accumulated other comprehensive loss, net of tax
$ (2,370)
$ (1,917)
$ (1,675)
Stockholders' Equity (Details 4) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2009
Net unrealized investment gains (losses) including investments reported as assets held-for-sale
 
Pretax changes in net unrealized investment gains (losses)
$ (19)
Net unrealized investment gains (losses)
44 
Fixed maturities
 
Net unrealized investment gains (losses) including investments reported as assets held-for-sale
 
Pretax changes in net unrealized investment gains (losses)
(3)
Other Investments
 
Net unrealized investment gains (losses) including investments reported as assets held-for-sale
 
Pretax changes in net unrealized investment gains (losses)
(16)
Net unrealized investment gains (losses)
69 
Deferred taxes
 
Net unrealized investment gains (losses) including investments reported as assets held-for-sale
 
Net unrealized investment gains (losses)
$ (25)
Employee Benefits (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Defined Contribution Savings Plans
 
 
 
Expense recognized for U.S. defined contribution savings plan
$ 104 
$ 65 
$ 56 
Expense recognized for U.K. defined contribution savings plan
43 
35 
38 
Expense recognized for defined contribution savings plans
$ 147 
$ 100 
$ 94 
Employee Benefits (Details 2) (USD $)
In Millions, unless otherwise specified
1 Months Ended 12 Months Ended
Apr. 30, 2009
employee
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Pension Plans, Defined Benefit
 
 
 
 
Defined Benefit Plan Disclosure
 
 
 
 
Percentage of the Company's projected benefit obligation
 
94.00% 
 
 
U.S. Pension Plan
 
 
 
 
Defined Benefit Plan Disclosure
 
 
 
 
Employees affected due to a change in pension plan
6,000 
 
 
 
Change in projected benefit obligation
 
 
 
 
Balance at the beginning of the Period
 
$ 2,376 
$ 2,139 
 
Interest cost
 
122 
124 
125 
Actuarial loss (gain)
 
51 
34 
 
Benefit payments
 
(115)
(111)
 
Change in discount rate
 
223 
190 
 
Balance at the end of the period
 
2,657 
2,376 
2,139 
Accumulated benefit obligation at end of year
 
2,657 
2,376 
 
Change in fair value of plan assets
 
 
 
 
Balance at the beginning of the period
 
1,244 
1,153 
 
Actual return on plan assets
 
83 
175 
 
Employer contributions
 
113 
27 
 
Benefit payments
 
(115)
(111)
 
Balance at the end of the period
 
1,325 
1,244 
1,153 
Market related value at the end of the year
 
1,410 
1,380 
 
Funded status
 
(1,332)
(1,132)
 
Unrecognized loss (gain)
 
1,480 
1,200 
 
Net amount recognized
 
148 
68 
 
International Pension Plan
 
 
 
 
Change in projected benefit obligation
 
 
 
 
Balance at the beginning of the Period
 
4,812 
4,500 
 
Service cost
 
19 
15 
18 
Interest cost
 
267 
249 
236 
Participant contributions
 
 
Plan amendment
 
12 
 
 
Plan transfer and acquisitions
 
17 
203 
 
Actuarial loss (gain)
 
(32)
(101)
 
Benefit payments
 
(181)
(183)
 
Change in discount rate
 
651 
260 
 
Foreign currency translation
 
17 
(132)
 
Balance at the end of the period
 
5,583 
4,812 
4,500 
Accumulated benefit obligation at end of year
 
5,508 
4,737 
 
Change in fair value of plan assets
 
 
 
 
Balance at the beginning of the period
 
4,288 
3,753 
 
Actual return on plan assets
 
595 
403 
 
Participant contributions
 
 
Employer contributions
 
364 
261 
 
Plan transfer and acquisitions
 
13 
192 
 
Benefit payments
 
(181)
(183)
 
Foreign currency translation
 
(139)
 
Balance at the end of the period
 
5,098 
4,288 
3,753 
Market related value at the end of the year
 
5,098 
4,288 
 
Funded status
 
(485)
(524)
 
Unrecognized prior-service cost (credit)
 
28 
17 
 
Unrecognized loss (gain)
 
2,109 
1,836 
 
Net amount recognized
 
1,652 
1,329 
 
Impact on projected benefit obligation recorded in accumulated other comprehensive loss
 
 
124 
 
Canadian pension plan
 
 
 
 
Defined Benefit Plan Disclosure
 
 
 
 
Employees that will be affected due to a change in pension plan in 2010
 
 
950 
 
U.S. and Canadian Other Post-Retirement Benefits
 
 
 
 
Change in projected benefit obligation
 
 
 
 
Accumulated benefit obligation at end of year
 
134 
119 
 
Change in fair value of plan assets
 
 
 
 
Balance at the end of the period
 
20 
22 
 
Funded status
 
(114)
(97)
 
Unrecognized prior-service cost (credit)
 
(8)
(11)
 
Unrecognized loss (gain)
 
25 
 
Net amount recognized
 
$ (97)
$ (99)
 
Employee Benefits (Details 3) (USD $)
Dec. 31, 2011
Dec. 31, 2010
U.S. Pension Plan
 
 
Amounts recognized in the Consolidated Statements of Financial Position
 
 
Accrued benefit liability (included in Pension, other post retirement, and post employment liabilities)
$ (1,332,000,000)
$ (1,132,000,000)
Accumulated other comprehensive loss
1,480,000,000 
1,200,000,000 
Net amount recognized
148,000,000 
68,000,000 
Amounts recognized in Accumulated other comprehensive loss unrecognized as components of net periodic benefit cost
 
 
Unrecognized loss (gain)
1,480,000,000 
1,200,000,000 
Amounts recognized in Accumulated other comprehensive loss unrecognized as components of net periodic benefit cost
1,480,000,000 
1,200,000,000 
Plans with accumulated benefit obligations ("ABO") in excess of the fair value of plan assets
 
 
Plans with accumulated benefit obligations ("ABO") in excess of the fair value of plan assets, PBO
2,700,000,000 
2,400,000,000 
Plans with accumulated benefit obligation ("ABO") in excess of the fair value of plan assets, ABO
2,700,000,000 
2,400,000,000 
Plans with accumulated benefit obligation ("ABO") in excess of the fair value of plan assets, fair value of plan assets
1,300,000,000 
1,200,000,000 
Plans with projected benefit obligations ("PBO") in excess of the fair value of plan assets
 
 
Plans with projected benefit obligations ("PBO") in excess of the fair value of plan assets, PBO
2,700,000,000 
2,400,000,000 
Plans with projected benefit obligations ("PBO") in excess of the fair value of plan assets
1,300,000,000 
1,200,000,000 
International Pension Plan
 
 
Amounts recognized in the Consolidated Statements of Financial Position
 
 
Prepaid benefit cost (included in other non-current assets)
159,000,000 
59,000,000 
Accrued benefit liability (included in Pension, other post retirement, and post employment liabilities)
(644,000,000)
(583,000,000)
Accumulated other comprehensive loss
2,137,000,000 
1,853,000,000 
Net amount recognized
1,652,000,000 
1,329,000,000 
Amounts recognized in Accumulated other comprehensive loss unrecognized as components of net periodic benefit cost
 
 
Unrecognized loss (gain)
2,109,000,000 
1,836,000,000 
Prior service cost (credit)
28,000,000 
17,000,000 
Amounts recognized in Accumulated other comprehensive loss unrecognized as components of net periodic benefit cost
2,137,000,000 
1,853,000,000 
Plans with accumulated benefit obligations ("ABO") in excess of the fair value of plan assets
 
 
Plans with accumulated benefit obligation ("ABO") in excess of the fair value of plan assets, ABO
3,000,000,000 
2,100,000,000 
Plans with accumulated benefit obligation ("ABO") in excess of the fair value of plan assets, fair value of plan assets
2,400,000,000 
1,600,000,000 
Plans with projected benefit obligations ("PBO") in excess of the fair value of plan assets
 
 
Plans with projected benefit obligations ("PBO") in excess of the fair value of plan assets, PBO
3,100,000,000 
2,700,000,000 
Plans with projected benefit obligations ("PBO") in excess of the fair value of plan assets
$ 2,500,000,000 
$ 2,300,000,000 
Employee Benefits (Details 4) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
U.S. Pension Plan
 
 
 
Defined Benefit Plan Disclosure
 
 
 
Interest cost
$ 122 
$ 124 
$ 125 
Expected return on plan assets
(120)
(118)
(102)
Amortization of prior-service cost
 
 
(1)
Amortization of net loss
31 
24 
28 
Net periodic benefit cost
33 
30 
50 
Expenses recognized as a result of an error, net of taxes
 
29 
 
Pretax expenses recognized as a result of an error
 
(49)
 
Weighted-average assumptions used to determine the net periodic benefit cost
 
 
 
Expected return on plan assets (as a percent)
8.80% 
8.80% 
8.70% 
Amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during next fiscal year
 
 
 
Amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during next fiscal year
43 
 
 
U.S. Pension Plan |
Minimum
 
 
 
Weighted-average assumptions used to determine future benefit obligations
 
 
 
Discount rate (as a percent)
4.33% 
4.35% 
 
Weighted-average assumptions used to determine the net periodic benefit cost
 
 
 
Discount rate (as a percent)
4.35% 
5.22% 
6.00% 
U.S. Pension Plan |
Maximum
 
 
 
Weighted-average assumptions used to determine future benefit obligations
 
 
 
Discount rate (as a percent)
4.60% 
5.34% 
 
Weighted-average assumptions used to determine the net periodic benefit cost
 
 
 
Discount rate (as a percent)
5.34% 
5.98% 
7.08% 
U.S. Pension Plan |
Continuing operations
 
 
 
Defined Benefit Plan Disclosure
 
 
 
Curtailment gain (loss) recognized
 
 
83 
International Pension Plan
 
 
 
Defined Benefit Plan Disclosure
 
 
 
Service cost
19 
15 
18 
Interest cost
267 
249 
236 
Expected return on plan assets
(287)
(240)
(234)
Amortization of prior-service cost
 
Amortization of net loss
53 
54 
41 
Net periodic benefit cost
53 
79 
61 
Amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during next fiscal year
 
 
 
Amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during next fiscal year
60 
 
 
International Pension Plan |
Minimum
 
 
 
Weighted-average assumptions used to determine future benefit obligations
 
 
 
Discount rate (as a percent)
4.40% 
4.70% 
 
Rate of compensation increase (as a percent)
2.25% 
2.50% 
 
Weighted-average assumptions used to determine the net periodic benefit cost
 
 
 
Discount rate (as a percent)
4.70% 
4.00% 
5.62% 
Expected return on plan assets (as a percent)
3.20% 
4.70% 
5.48% 
Rate of compensation increase (as a percent)
2.00% 
2.50% 
3.25% 
International Pension Plan |
Maximum
 
 
 
Weighted-average assumptions used to determine future benefit obligations
 
 
 
Discount rate (as a percent)
4.94% 
5.50% 
 
Rate of compensation increase (as a percent)
3.55% 
4.00% 
 
Weighted-average assumptions used to determine the net periodic benefit cost
 
 
 
Discount rate (as a percent)
5.50% 
6.19% 
7.42% 
Expected return on plan assets (as a percent)
7.20% 
7.00% 
7.00% 
Rate of compensation increase (as a percent)
4.00% 
3.60% 
3.50% 
Canadian pension plan
 
 
 
Defined Benefit Plan Disclosure
 
 
 
Curtailment gain (loss) recognized
 
 
(5)
U.S. and Canadian Other Post-Retirement Benefits
 
 
 
Defined Benefit Plan Disclosure
 
 
 
Net periodic benefit cost
Curtailment gain due to the sale of CICA
 
 
10 
Amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during next fiscal year
 
 
 
Net loss (gain)
 
 
Prior service credit
$ 3 
 
 
U.S. and Canadian Other Post-Retirement Benefits |
Minimum
 
 
 
Weighted-average assumptions used to determine future benefit obligations
 
 
 
Discount rate (as a percent)
4.33% 
4.92% 
5.90% 
Weighted-average assumptions used to determine the net periodic benefit cost
 
 
 
Discount rate (as a percent)
4.92% 
5.90% 
6.22% 
U.S. and Canadian Other Post-Retirement Benefits |
Maximum
 
 
 
Weighted-average assumptions used to determine future benefit obligations
 
 
 
Discount rate (as a percent)
5.00% 
6.00% 
6.19% 
Weighted-average assumptions used to determine the net periodic benefit cost
 
 
 
Discount rate (as a percent)
6.00% 
6.18% 
7.50% 
Employee Benefits (Details 5) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
U.S. Pension Plan
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
$ 1,325 
$ 1,244 
$ 1,153 
U.S. Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
287 
298 
 
U.S. Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Cash and cash equivalents
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
22 
 
 
U.S. Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Highly liquid debt instruments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
 
U.S. Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Large cap domestic
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
151 
247 
 
U.S. Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Large cap international
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
11 
 
U.S. Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Equity derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
63 
 
 
U.S. Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Real estate and REITS
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
42 
39 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2)
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
847 
753 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2) |
Highly liquid debt instruments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
26 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2) |
Large cap international
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
88 
 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2) |
Equity derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
110 
231 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2) |
Small Cap Domestic
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
58 
22 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2) |
Corporate bonds
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
355 
395 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2) |
Government and agency bonds
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
116 
50 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2) |
Asset-backed securities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
18 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2) |
Fixed income derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
83 
 
U.S. Pension Plan |
Significant Other Observable Inputs (Level 2) |
Commodity derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
19 
18 
 
U.S. Pension Plan |
Significant Unobservable (Level 3) Inputs
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
191 
193 
138 
U.S. Pension Plan |
Fair Value |
Cash and cash equivalents
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
22 
 
 
U.S. Pension Plan |
Fair Value |
Highly liquid debt instruments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
27 
 
U.S. Pension Plan |
Fair Value |
Large cap domestic
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
151 
247 
 
U.S. Pension Plan |
Fair Value |
Large cap international
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
97 
11 
 
U.S. Pension Plan |
Fair Value |
Equity derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
173 
231 
 
U.S. Pension Plan |
Fair Value |
Small Cap Domestic
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
58 
22 
 
U.S. Pension Plan |
Fair Value |
Corporate bonds
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
355 
395 
 
U.S. Pension Plan |
Fair Value |
Government and agency bonds
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
116 
50 
 
U.S. Pension Plan |
Fair Value |
Asset-backed securities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
18 
 
U.S. Pension Plan |
Fair Value |
Fixed income derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
83 
 
U.S. Pension Plan |
Fair Value |
Alternative investments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
191 
193 
 
U.S. Pension Plan |
Fair Value |
Commodity derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
19 
18 
 
U.S. Pension Plan |
Fair Value |
Real estate and REITS
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
42 
39 
 
International Pension Plan
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
5,098 
4,288 
3,753 
International Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
1,703 
175 
 
International Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Cash and cash equivalents
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
276 
54 
 
International Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Other Equity Securities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
128 
121 
 
International Pension Plan |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Fixed income investments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
1,299 
 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2)
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
2,496 
3,186 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Equity derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
11 
 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Global
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
960 
661 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Europe
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
347 
574 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
North America
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
56 
133 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Asia Pacific
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
67 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Other Equity Securities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Fixed income investments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
56 
 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Fixed income derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
21 
 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Fixed income investments, pooled funds
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
907 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Fixed income securities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
823 
805 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
178 
(28)
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Commodities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
26 
34 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
REITS
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Alternative investments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
17 
 
International Pension Plan |
Significant Other Observable Inputs (Level 2) |
Commodity derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
14 
 
 
International Pension Plan |
Significant Unobservable (Level 3) Inputs
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
899 
927 
746 
International Pension Plan |
Significant Unobservable (Level 3) Inputs |
Global
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
162 
145 
International Pension Plan |
Significant Unobservable (Level 3) Inputs |
Fixed income investments, pooled funds
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
40 
 
International Pension Plan |
Significant Unobservable (Level 3) Inputs |
Annuities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
419 
380 
432 
International Pension Plan |
Significant Unobservable (Level 3) Inputs |
Real Estate
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
134 
127 
136 
International Pension Plan |
Significant Unobservable (Level 3) Inputs |
Alternative investments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
346 
218 
33 
International Pension Plan |
Fair Value
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
4,288 
 
International Pension Plan |
Fair Value |
Cash and cash equivalents
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
276 
54 
 
International Pension Plan |
Fair Value |
Equity derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
11 
 
 
International Pension Plan |
Fair Value |
Global
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
960 
823 
 
International Pension Plan |
Fair Value |
Europe
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
347 
574 
 
International Pension Plan |
Fair Value |
North America
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
56 
133 
 
International Pension Plan |
Fair Value |
Asia Pacific
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
67 
 
International Pension Plan |
Fair Value |
Other Equity Securities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
128 
129 
 
International Pension Plan |
Fair Value |
Fixed income investments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
1,355 
 
 
International Pension Plan |
Fair Value |
Fixed income derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
21 
 
 
International Pension Plan |
Fair Value |
Fixed income investments, pooled funds
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
947 
 
International Pension Plan |
Fair Value |
Fixed income securities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
823 
805 
 
International Pension Plan |
Fair Value |
Annuities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
419 
380 
 
International Pension Plan |
Fair Value |
Derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
178 
(28)
 
International Pension Plan |
Fair Value |
Commodities
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
26 
34 
 
International Pension Plan |
Fair Value |
REITS
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
 
International Pension Plan |
Fair Value |
Real Estate
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
134 
127 
 
International Pension Plan |
Fair Value |
Alternative investments
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
346 
235 
 
International Pension Plan |
Fair Value |
Commodity derivatives
 
 
 
Fair values of Aon's pension plan assets
 
 
 
Total
$ 14 
 
 
Employee Benefits (Details 6) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended
Dec. 31, 2011
U.S. Pension Plan
Dec. 31, 2009
U.S. Pension Plan
Dec. 31, 2011
U.S. Pension Plan
Significant Unobservable (Level 3) Inputs
Dec. 31, 2010
U.S. Pension Plan
Significant Unobservable (Level 3) Inputs
Dec. 31, 2011
International Pension Plan
Dec. 31, 2010
International Pension Plan
Dec. 31, 2011
International Pension Plan
Significant Unobservable (Level 3) Inputs
Dec. 31, 2010
International Pension Plan
Significant Unobservable (Level 3) Inputs
Dec. 31, 2011
International Pension Plan
Significant Unobservable (Level 3) Inputs
Global
Dec. 31, 2010
International Pension Plan
Significant Unobservable (Level 3) Inputs
Global
Dec. 31, 2011
International Pension Plan
Significant Unobservable (Level 3) Inputs
Fixed
Dec. 31, 2010
International Pension Plan
Significant Unobservable (Level 3) Inputs
Fixed
Dec. 31, 2011
International Pension Plan
Significant Unobservable (Level 3) Inputs
Annuities
Dec. 31, 2010
International Pension Plan
Significant Unobservable (Level 3) Inputs
Annuities
Dec. 31, 2011
International Pension Plan
Significant Unobservable (Level 3) Inputs
Real Estate
Dec. 31, 2010
International Pension Plan
Significant Unobservable (Level 3) Inputs
Real Estate
Dec. 31, 2011
International Pension Plan
Significant Unobservable (Level 3) Inputs
Alternative investments
Dec. 31, 2010
International Pension Plan
Significant Unobservable (Level 3) Inputs
Alternative investments
Change in fair value of plan assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at the beginning of the period
$ 1,244 
$ 1,153 
$ 193 
$ 138 
$ 4,288 
$ 3,753 
$ 927 
$ 746 
$ 162 
$ 145 
$ 40 
 
$ 380 
$ 432 
$ 127 
$ 136 
$ 218 
$ 33 
Actual return on plan assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Relating to assets still held at the end of the year
 
 
(8)
 
 
38 
 
 
20 
 
35 
(38)
 
Relating to assets sold during the year
 
 
 
 
 
 
 
 
 
 
 
Purchases, sales and settlements
 
 
35 
 
 
88 
212 
 
10 
 
38 
 
 
(12)
86 
176 
Transfer in/(out) of Level 3
 
 
 
11 
 
 
(160)
 
(162)
 
(40)
 
 
 
 
41 
 
Foreign Exchange
 
 
 
 
(139)
(35)
 
(15)
 
 
(14)
(6)
 
 
Balance at the end of the period
$ 1,325 
$ 1,153 
$ 191 
$ 193 
$ 5,098 
$ 4,288 
$ 899 
$ 927 
 
$ 162 
 
$ 40 
$ 419 
$ 380 
$ 134 
$ 127 
$ 346 
$ 218 
Target asset allocations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Target allocation percentage for equity investments
49.00% 
 
 
 
43.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Target allocation percentage for fixed income investments
30.00% 
 
 
 
57.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Target allocation percentage for other investments
21.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Benefits (Details 7) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2007
Y
U.S. Pension Plan
 
 
Defined Benefit Plan Disclosure
 
 
Expected employer contributions during next fiscal year
$ 237 
 
Estimated future benefit payments for plans
 
 
2012
137 
 
2013
147 
 
2014
142 
 
2015
148 
 
2016
146 
 
2017-2021
753 
 
International Pension Plan
 
 
Defined Benefit Plan Disclosure
 
 
Expected employer contributions during next fiscal year
304 
 
Estimated future benefit payments for plans
 
 
2012
164 
 
2013
172 
 
2014
180 
 
2015
187 
 
2016
198 
 
2017-2021
990 
 
U.S. and Canadian Other Post-Retirement Benefits
 
 
Defined Benefit Plan Disclosure
 
 
Expected employer contributions during next fiscal year
 
Estimated future benefit payments for plans
 
 
2012
 
2013
 
2014
 
2015
 
2016
 
2017-2021
49 
 
Effect of one percentage point increase on accumulated postretirement benefit obligation
 
Effect of one percentage point decrease on accumulated postretirement benefit obligation
 
Effect of one percentage point increase on service cost and interest cost components of net periodic benefit cost
 
Effect of one percentage point decrease on service cost and interest cost components of net periodic benefit cost
$ 1 
 
U.S. Other Post-Retirement Benefits
 
 
Estimated future benefit payments for plans
 
 
Maximum percentage of liability for future plan cost increases for pre-65 and medical supplement plan coverage
5.00% 
 
Maximum percentage of net employer trend rates for pre-65 and medical supplement plan coverage per year in the future
5.00% 
 
Recognition period of plan amendment which phases out post-65 retiree coverage
 
Stock Compensation Plans (Details) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Stock-based compensation expense, net of tax
$ 235 
$ 221 
$ 209 
Tax benefit
77 
75 
68 
Stock-based compensation expense, net of tax
158 
146 
141 
Non-vested stock awards
 
 
 
Shares issued
500 
2,200 
1,000 
Restricted Stock Units ("RSUs")
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Stock-based compensation expense, net of tax
142 
138 
124 
Vesting period, minimum (in years)
P3Y 
 
 
Vesting period, maximum (in years)
P5Y 
 
 
Vesting period from grant date of award (in years)
10 years 
 
 
Non-vested stock awards
 
 
 
Non-vested at beginning of period (in shares)
10,674 
12,850 
14,060 
Granted (in shares)
3,506 
3,817 
3,786 
Vested (in shares)
(3,773)
(5,278)
(4,330)
Forfeited (in shares)
(491)
(715)
(666)
Non-vested at end of period (in shares)
9,916 
10,674 
12,850 
Weighted Average Fair value
 
 
 
Non-vested at beginning of period (in dollars per share)
$ 38 
$ 36 
$ 35 
Granted (in dollars per share)
$ 51 
$ 40 
$ 38 
Vested (in dollars per share)
$ 39 
$ 35 
$ 33 
Forfeited (in dollars per share)
$ 39 
$ 35 
$ 37 
Non-vested at end of period (in dollars per share)
$ 42 
$ 38 
$ 36 
Fair value of awards vested during the period
217 
235 
223 
Performance-based Awards
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Stock-based compensation expense, net of tax
78 
62 
60 
Vesting period, minimum (in years)
P1Y 
 
 
Vesting period, maximum (in years)
P5Y 
 
 
Percentage of number of units granted, low end of the range
0.00% 
 
 
Percentage of number of units granted, high end of the range
200.00% 
 
 
Non-vested stock awards
 
 
 
Granted (in shares)
1,715 
1,390 
3,754 
Weighted Average Fair value
 
 
 
Granted (in dollars per share)
$ 50 
$ 39 
$ 38 
Number of shares that would be issued based on current performance levels
1,772 
1,397 
2,300 
Unamortized expense, based on current performance levels
60 
18 
Stock options
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Stock-based compensation expense, net of tax
17 
21 
Vesting period, minimum (in years)
P4Y 
 
 
2008 Leadership Performance Plan ("LPP") cycle |
Performance-based Awards
 
 
 
Non-vested stock awards
 
 
 
Shares issued
1,200 
 
 
2007 Leadership Performance Plan ("LPP") cycle |
Performance-based Awards
 
 
 
Non-vested stock awards
 
 
 
Shares issued
 
1,600 
 
2006 performance plan |
Performance-based Awards
 
 
 
Non-vested stock awards
 
 
 
Shares issued
300 
 
 
Other Performance Plans |
Performance-based Awards
 
 
 
Non-vested stock awards
 
 
 
Shares issued
 
84 
 
Employee stock purchase plans
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Stock-based compensation expense, net of tax
$ 6 
$ 4 
$ 4 
Stock Compensation Plans (Details 2) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Employee Stock Option
 
 
 
Employee Stock Options and Stock Awards
 
 
 
Continuous years of service before options begin to vest (in years)
2 years 
 
 
Minimum continuous years of service before options are completely vested (in years)
P4Y 
 
 
Maximum contractual term (in years)
P10Y 
 
 
Stock Options
 
 
 
Outstanding at beginning of period (in shares)
13,919 
15,937 
19,666 
Options issued in connection with the Hewitt acquisition (in shares)
 
4,545 
 
Granted (in shares)
80 
143 
1,551 
Exercised (in shares)
(4,546)
(6,197)
(4,475)
Forfeited and expired (in shares)
(337)
(509)
(805)
Outstanding at end of period (in shares)
9,116 
13,919 
15,937 
Exercisable at end of period (in shares)
7,833 
11,293 
9,884 
Shares available for grant (in shares)
24,508 
22,777 
8,257 
Weighted-Average Exercise Price
 
 
 
Outstanding at beginning of period (in dollars per share)
$ 32 
$ 33 
$ 31 
Granted (in dollars per share)
$ 53 
$ 38 
$ 38 
Options issued in connection with the Hewitt acquisition (in dollars per share)
 
$ 22 
 
Exercised (in dollars per share)
$ 32 
$ 27 
$ 27 
Forfeited and expired (in dollars per share)
$ 36 
$ 35 
$ 38 
Outstanding at end of period (in dollars per share)
$ 32 
$ 32 
$ 33 
Exercisable at end of period (in dollars per share)
$ 30 
$ 30 
$ 31 
Leadership Performance Plan ("LPP") cycle
 
 
 
Weighted Average assumptions, weighted average expected life and estimated fair value of options
 
 
 
Weighted average volatility (as a percent)
 
 
35.50% 
Expected dividend yield (as a percent)
 
 
1.30% 
Risk-free rate (as a percent)
 
 
1.50% 
Weighted average expected life (in years)
 
 
4.40 
Weighted average estimated fair value per share (in dollars per share)
 
 
$ 12.19 
Stock Options
 
 
 
Granted (in shares)
 
 
1,000 
Weighted-Average Exercise Price
 
 
 
Granted (in dollars per share)
 
 
$ 39 
Leadership Performance Plan ("LPP") cycle |
Employee Stock Option
 
 
 
Employee Stock Options and Stock Awards
 
 
 
Vesting period (in years)
3 years 
 
 
Maximum contractual term (in years)
P6Y 
 
 
Special Stock Plan
 
 
 
Weighted Average assumptions, weighted average expected life and estimated fair value of options
 
 
 
Weighted average volatility (as a percent)
 
 
34.10% 
Expected dividend yield (as a percent)
 
 
1.50% 
Risk-free rate (as a percent)
 
 
2.00% 
Weighted average expected life (in years)
 
 
5.60 
Weighted average estimated fair value per share (in dollars per share)
 
 
$ 11.82 
All Other Option Plans
 
 
 
Weighted Average assumptions, weighted average expected life and estimated fair value of options
 
 
 
Weighted average volatility (as a percent)
26.10% 
28.50% 
32.00% 
Expected dividend yield (as a percent)
1.30% 
1.60% 
1.50% 
Risk-free rate (as a percent)
2.20% 
3.00% 
2.60% 
Weighted average expected life (in years)
5.5 
6.10 
6.50 
Weighted average estimated fair value per share (in dollars per share)
$ 10.92 
$ 10.37 
$ 12.34 
Incentive compensation plans |
Employee Stock Option
 
 
 
Weighted Average assumptions, weighted average expected life and estimated fair value of options
 
 
 
Granted (in dollars per share)
$ 53 
$ 38 
$ 37 
Stock Options
 
 
 
Granted (in shares)
80 
143 
550 
Hewitt Associates, Inc (Hewitt)
 
 
 
Stock Options
 
 
 
Outstanding at end of period (in shares)
1,200 
 
 
Shares available for grant (in shares)
 
4,500 
 
Stock Compensation Plans (Details 3) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Y
Range of exercise price
 
Stock options outstanding and stock options exercisable
 
Stock options, outstanding (in shares)
9,116 
Stock options exercisable (in shares)
7,833 
Range of exercise price, $ 14.71 - $ 22.86
 
Stock options outstanding and stock options exercisable
 
Stock options, range of exercise prices, low end of the range (in dollars per share)
$ 14.71 
Stock options, range of exercise prices, high end of the range (in dollars per share)
$ 22.86 
Stock options, outstanding (in shares)
2,718 
Weighted average remaining contractual life of stock options outstanding (in years)
2.66 
Weighted average exercise price of stock options outstanding (in dollars per share)
$ 20.95 
Stock options exercisable (in shares)
2,718 
Weighted average remaining contractual life of stock options exercisable (in years)
2.66 
Weighted average exercise price of stock options exercisable (in dollars per share)
$ 20.95 
Range of exercise price, $ 22.87 - $ 25.51
 
Stock options outstanding and stock options exercisable
 
Stock options, range of exercise prices, low end of the range (in dollars per share)
$ 22.87 
Stock options, range of exercise prices, high end of the range (in dollars per share)
$ 25.51 
Stock options, outstanding (in shares)
663 
Weighted average remaining contractual life of stock options outstanding (in years)
3.40 
Weighted average exercise price of stock options outstanding (in dollars per share)
$ 25.37 
Stock options exercisable (in shares)
663 
Weighted average remaining contractual life of stock options exercisable (in years)
3.40 
Weighted average exercise price of stock options exercisable (in dollars per share)
$ 25.37 
Range of exercise price, $ 25.52 - $ 32.53
 
Stock options outstanding and stock options exercisable
 
Stock options, range of exercise prices, low end of the range (in dollars per share)
$ 25.52 
Stock options, range of exercise prices, high end of the range (in dollars per share)
$ 32.53 
Stock options, outstanding (in shares)
1,069 
Weighted average remaining contractual life of stock options outstanding (in years)
2.95 
Weighted average exercise price of stock options outstanding (in dollars per share)
$ 27.53 
Stock options exercisable (in shares)
1,069 
Weighted average remaining contractual life of stock options exercisable (in years)
2.95 
Weighted average exercise price of stock options exercisable (in dollars per share)
$ 27.53 
Range of exercise price, $ 32.54 - $ 36.88
 
Stock options outstanding and stock options exercisable
 
Stock options, range of exercise prices, low end of the range (in dollars per share)
$ 32.54 
Stock options, range of exercise prices, high end of the range (in dollars per share)
$ 36.88 
Stock options, outstanding (in shares)
1,277 
Weighted average remaining contractual life of stock options outstanding (in years)
2.96 
Weighted average exercise price of stock options outstanding (in dollars per share)
$ 36.05 
Stock options exercisable (in shares)
1,037 
Weighted average remaining contractual life of stock options exercisable (in years)
2.41 
Weighted average exercise price of stock options exercisable (in dollars per share)
$ 35.96 
Range of exercise price, $ 36.89 - $ 43.44
 
Stock options outstanding and stock options exercisable
 
Stock options, range of exercise prices, low end of the range (in dollars per share)
$ 36.89 
Stock options, range of exercise prices, high end of the range (in dollars per share)
$ 43.44 
Stock options, outstanding (in shares)
2,309 
Weighted average remaining contractual life of stock options outstanding (in years)
3.04 
Weighted average exercise price of stock options outstanding (in dollars per share)
$ 39.72 
Stock options exercisable (in shares)
1,757 
Weighted average remaining contractual life of stock options exercisable (in years)
2.35 
Weighted average exercise price of stock options exercisable (in dollars per share)
$ 39.92 
Range of exercise price, $ 43.45 - $ 52.93
 
Stock options outstanding and stock options exercisable
 
Stock options, range of exercise prices, low end of the range (in dollars per share)
$ 43.45 
Stock options, range of exercise prices, high end of the range (in dollars per share)
$ 52.93 
Stock options, outstanding (in shares)
1,080 
Weighted average remaining contractual life of stock options outstanding (in years)
4.49 
Weighted average exercise price of stock options outstanding (in dollars per share)
$ 46.24 
Stock options exercisable (in shares)
589 
Weighted average remaining contractual life of stock options exercisable (in years)
4.09 
Weighted average exercise price of stock options exercisable (in dollars per share)
$ 45.54 
Stock Compensation Plans (Details 4) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Y
Dec. 31, 2010
Dec. 31, 2009
Stock Options
 
 
 
Closing stock price (in dollars per share)
$ 46.80 
 
 
Aggregate intrinsic value of options outstanding
$ 136 
 
 
Aggregate intrinsic value of exercisable options outstanding
129 
 
 
Aggregate intrinsic value of stock options exercised
80 
87 
62 
Cash received from the exercise of stock options
153 
162 
121 
Tax benefit realized from the exercise of stock options
14 
15 
Unamortized deferred compensation expense
$ 263 
 
 
Remaining weighted-average amortization period (in years)
2.0 
 
 
Stock Compensation Plans (Details 5) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2011
United States
M
Dec. 31, 2010
United States
M
Dec. 31, 2009
United States
Dec. 31, 2008
United States
Dec. 31, 2011
United States
Maximum
Dec. 31, 2011
United Kingdom
Y
Dec. 31, 2010
United Kingdom
Dec. 31, 2009
United Kingdom
Dec. 31, 2008
United Kingdom
Maximum
Dec. 31, 2006
United Kingdom
Maximum
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum purchase of shares under plan (in shares)
 
 
 
 
 
 
 
7,500,000 
 
 
 
200,000 
525,000 
Period of interval for purchase of common stock (in months)
 
 
 
 
 
 
 
 
 
 
 
Purchase price expressed as a percentage of the fair market value of common stock (as a percent)
 
 
 
85.00% 
85.00% 
 
 
 
 
 
 
 
 
Stock issued to employees under the plan (in shares)
 
 
 
468,000 
357,000 
323,000 
320,000 
 
63,000 
5,000 
201,000 
 
 
Compensation expense
$ 235 
$ 221 
$ 209 
$ 5 
$ 3 
$ 3 
 
 
$ 1 
$ 1 
$ 1 
 
 
Waiting period before purchase of shares (in years)
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives and Hedging (Details)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended
Dec. 31, 2011
USD ($)
Y
Dec. 31, 2011
Cash flow hedges
Dec. 31, 2011
Net investment hedges
Dec. 31, 2011
Fixed rate debt
USD ($)
Dec. 31, 2009
Fixed rate debt
EUR (€)
Dec. 31, 2011
Forward starting swaps
USD ($)
Aug. 30, 2010
Forward starting swaps
USD ($)
Dec. 31, 2011
Not designated as hedging instrument
Foreign Exchange Risk Management
 
 
 
 
 
 
 
 
Maximum Maturity of Foreign Currency Cash Flow Derivatives
 
5 years 
2 years 
 
 
 
 
1 year 
Foreign currency exposures, maximum average hedging period (in years)
2 years 
 
 
 
 
 
 
 
Pretax gain (loss) deferred to OCI related to cash flow hedges utilizing foreign currency derivatives
$ (43)
 
 
 
 
 
 
 
Pretax gain (loss) deferred to OCI related to foreign currency derivatives used as cash flow hedges and expected to be reclassified to earnings in the next 12 months
(30)
 
 
 
 
 
 
 
Foreign currency exposures, maximum hedging period (in years)
 
 
 
 
 
 
 
Pretax gain (loss) deferred to OCI related to net investment hedges utilizing foreign exchange derivatives
109 
 
 
 
 
 
 
 
Period to manage the currency exposure of global liquidity profile (in years)
 
 
 
 
 
 
 
Interest Rate Risk Management
 
 
 
 
 
 
 
 
Interest rate fluctuations, maximum hedging period (in years)
2 years 
 
 
 
 
 
 
 
Pretax gain (loss) deferred to OCI related to interest rate derivatives used as cash flow hedges and expected to be reclassified to earnings in the next 12 months
 
 
 
 
(12)
 
 
Pretax gain (loss) deferred to OCI related to interest rate forward starting swaps used as cash flow hedges and expected to be reclassified to earnings in the next 12 months
 
 
 
 
 
(1)
 
 
Notional amount of interest rate cash flow hedge derivatives
 
 
 
 
 
 
500 
 
Fixed rate debt issued by subsidiary
 
 
 
 
500 
 
 
 
Carrying amount of fixed rate debt issued by foreign subsidiary at exchange rates in effect at end of period (in dollars)
 
 
 
$ 655 
 
 
 
 
Derivatives and Hedging (Details 2) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Derivatives, Fair Value
 
 
Derivative Assets
$ 157 
$ 174 
Derivative Liabilities
189 
158 
Notional Amount
2,245 
2,608 
Derivatives accounted for as hedges:
 
 
Derivatives, Fair Value
 
 
Derivative Assets
156 
172 
Derivative Liabilities
188 
157 
Notional Amount
1,999 
2,370 
Interest rate contracts |
Derivatives accounted for as hedges:
 
 
Derivatives, Fair Value
 
 
Derivative Assets
16 
15 
Notional Amount
702 
826 
Foreign exchange contracts |
Derivatives accounted for as hedges:
 
 
Derivatives, Fair Value
 
 
Derivative Assets
140 
157 
Derivative Liabilities
188 
157 
Notional Amount
1,297 
1,544 
Foreign exchange contracts |
Derivatives not accounted for as hedges:
 
 
Derivatives, Fair Value
 
 
Derivative Assets
Derivative Liabilities
Notional Amount
$ 246 
$ 238 
Derivatives and Hedging (Details 3) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Derivatives accounted for as hedges: |
Cash flow hedges
 
 
Derivative Instruments, Gain (Loss)
 
 
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
$ (55)
$ (155)
Amount of Gain (Loss) Reclassified from OCI into Income (Effective Portion)
(36)
(118)
Interest rate contracts |
Derivatives accounted for as hedges: |
Cash flow hedges
 
 
Derivative Instruments, Gain (Loss)
 
 
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
(1)
(10)
Amount of Gain (Loss) Reclassified from OCI into Income (Effective Portion)
 
16 
Foreign exchange contracts |
Derivatives accounted for as hedges: |
Cash flow hedges
 
 
Derivative Instruments, Gain (Loss)
 
 
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
(54)
(145)
Amount of Gain (Loss) Reclassified from OCI into Income (Effective Portion)
(36)
(134)
Foreign exchange contracts |
Derivatives accounted for as hedges: |
Net investment hedges
 
 
Derivative Instruments, Gain (Loss)
 
 
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
(2)
111 
Foreign exchange contracts |
Derivatives accounted for as hedges: |
Fair value hedges
 
 
Derivative Instruments, Gain (Loss)
 
 
Amount of Gain (Loss) Recognized in Income on Derivative
Amount of Gain (Loss) Recognized in Income on Related Hedged Item
(2)
(6)
Foreign exchange contracts |
Derivatives not accounted for as hedges:
 
 
Derivative Instruments, Gain (Loss)
 
 
Amount of Gain (Loss) Recognized in Income on Derivative
$ 9 
$ 10 
Fair Value Measurements and Financial Instruments (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2011
Fair Value
Money market funds and highly liquid debt securities
Recurring
Dec. 31, 2010
Fair Value
Money market funds and highly liquid debt securities
Recurring
Dec. 31, 2011
Fair Value
Corporate bonds
Recurring
Dec. 31, 2010
Fair Value
Corporate bonds
Recurring
Dec. 31, 2011
Fair Value
Government bonds.
Recurring
Dec. 31, 2010
Fair Value
Government bonds.
Recurring
Dec. 31, 2011
Fair Value
Interest rate contracts
Recurring
Dec. 31, 2010
Fair Value
Interest rate contracts
Recurring
Dec. 31, 2011
Fair Value
Foreign exchange contracts
Recurring
Dec. 31, 2010
Fair Value
Foreign exchange contracts
Recurring
Dec. 31, 2011
Quoted Prices in Active Markets for Identical Assets (Level 1)
Money market funds and highly liquid debt securities
Recurring
Dec. 31, 2010
Quoted Prices in Active Markets for Identical Assets (Level 1)
Money market funds and highly liquid debt securities
Recurring
Dec. 31, 2011
Significant Other Observable Inputs (Level 2)
Money market funds and highly liquid debt securities
Recurring
Dec. 31, 2010
Significant Other Observable Inputs (Level 2)
Money market funds and highly liquid debt securities
Recurring
Dec. 31, 2011
Significant Other Observable Inputs (Level 2)
Government bonds.
Recurring
Dec. 31, 2010
Significant Other Observable Inputs (Level 2)
Government bonds.
Recurring
Dec. 31, 2011
Significant Other Observable Inputs (Level 2)
Interest rate contracts
Recurring
Dec. 31, 2010
Significant Other Observable Inputs (Level 2)
Interest rate contracts
Recurring
Dec. 31, 2011
Significant Other Observable Inputs (Level 2)
Foreign exchange contracts
Recurring
Dec. 31, 2010
Significant Other Observable Inputs (Level 2)
Foreign exchange contracts
Recurring
Dec. 31, 2011
Significant Unobservable (Level 3) Inputs
Corporate bonds
Recurring
Dec. 31, 2010
Significant Unobservable (Level 3) Inputs
Corporate bonds
Recurring
Fair Value Measurements and Financial Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net assets value (in dollar per share)
$ 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds and highly liquid debt securities
 
$ 2,428 
$ 2,618 
 
 
 
 
 
 
 
 
$ 2,403 
$ 2,591 
$ 25 
$ 27 
 
 
 
 
 
 
 
 
Other investments
 
 
 
12 
12 
 
 
 
 
 
 
 
 
 
 
 
 
12 
12 
Derivatives
 
 
 
 
 
 
 
16 
15 
141 
159 
 
 
 
 
 
 
16 
15 
141 
159 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives
 
 
 
 
 
 
 
 
 
$ 189 
$ 158 
 
 
 
 
 
 
 
 
$ 189 
$ 158 
 
 
Fair Value Measurements and Financial Instruments (Details 2) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2010
Dec. 31, 2011
Other Investments
 
 
Fair value assets
 
 
Balance at beginning of period
$ 100 
$ 12 
Purchases and sales
(1)
 
Transfers
(87)
 
Balance at end of period
12 
12 
Guarantees
 
 
Fair value assets
 
 
Balance at beginning of period
(4)
 
Gains (losses) included in earnings
$ 4 
 
Fair Value Measurements and Financial Instruments (Details 3) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Fair value of financial instrument
 
 
Carrying value of total debt
$ 4,155 
$ 4,014 
Fair value of total debt
$ 4,494 
$ 4,172 
Commitments and Contingencies (Details)
1 Months Ended 1 Months Ended 12 Months Ended
Mar. 31, 2011
USD ($)
Dec. 31, 2011
USD ($)
May 31, 2010
Opry Mills Mall Limited Partnership
USD ($)
Dec. 31, 2011
Commitments to fund certain limited partnerships
USD ($)
Jan. 31, 2009
FCPA
Settlements - fines
GBP (£)
Jan. 31, 2009
FCPA
Settlements - penalties
USD ($)
Jan. 31, 2009
FCPA
Settlements - interest
USD ($)
Legal, Guarantees and Indemnifications
 
 
 
 
 
 
 
Agreed upon payment in exchange for dismissal of class claims
$ 550,000 
 
 
 
 
 
 
Settlement agreement with the FCPA to pay penalty
 
 
 
 
5,250,000 
1,800,000 
14,500,000 
Damages sought by Opry Mills Mall Limited Partnership
 
 
200,000,000 
 
 
 
 
Amount of coverage for damages contended by the insurers
 
 
50,000,000 
 
 
 
 
Difference amount of damages sought by the client
 
 
150,000,000 
 
 
 
 
Estimated exposure with respect to contractual contingent guarantees for premium payments owed by clients
 
48,000,000 
 
 
 
 
 
Maximum potential funding under commitments
 
 
 
64,000,000 
 
 
 
Commitments funded
 
 
 
$ 15,000,000 
 
 
 
Commitments and Contingencies (Details 2) (USD $)
Dec. 31, 2011
plan
Dec. 31, 2010
Commitments and Contingencies
 
 
Letters of credit outstanding
$ 75,000,000 
$ 71,000,000 
Number of US pension plans that are a LOC beneficiary
 
Related Party Transactions (Details) (Significant shareholder, USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Significant shareholder
 
Related party transactions
 
Commissions and fee revenue from transactions with related party
$ 9 
Segment Information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
segment
Dec. 31, 2010
Dec. 31, 2009
Segment Information
 
 
 
 
 
 
 
 
 
 
 
Number of reportable segments
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 2,994 
$ 2,723 
$ 2,811 
$ 2,759 
$ 2,909 
$ 1,801 
$ 1,898 
$ 1,904 
$ 11,287 
$ 8,512 
$ 7,595 
Commissions, fees and other revenues
2,980 
2,708 
2,799 
2,748 
2,897 
1,786 
1,883 
1,891 
11,235 
8,457 
7,521 
Fiduciary investment income
14 
15 
12 
11 
12 
15 
15 
13 
52 
55 
74 
Operating income from continuing operations before income taxes
435 
341 
434 
396 
422 
263 
268 
273 
1,606 
1,226 
1,021 
Interest income
 
 
 
 
 
 
 
 
18 
15 
16 
Interest expense
 
 
 
 
 
 
 
 
(245)
(182)
(122)
Other income
 
 
 
 
 
 
 
 
 
34 
Income from continuing operations before income taxes
 
 
 
 
 
 
 
 
1,384 
1,059 
949 
Long-lived assets
13,789 
 
 
 
14,158 
 
 
 
13,789 
14,158 
 
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
11,287 
8,512 
7,595 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
11,235 
8,457 
7,521 
Fiduciary investment income
 
 
 
 
 
 
 
 
52 
55 
74 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
1,762 
1,428 
1,103 
Interest income
 
 
 
 
 
 
 
 
18 
15 
16 
Interest expense
 
 
 
 
 
 
 
 
(245)
(182)
(122)
Other income
 
 
 
 
 
 
 
 
 
34 
Income from continuing operations before income taxes
 
 
 
 
 
 
 
 
1,384 
1,059 
949 
United States.
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
5,134 
3,400 
2,789 
Long-lived assets
8,617 
 
 
 
9,135 
 
 
 
8,617 
9,135 
 
Americas other than U.S.
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
1,176 
978 
905 
Long-lived assets
574 
 
 
 
503 
 
 
 
574 
503 
 
United Kingdom.
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
1,519 
1,322 
1,289 
Long-lived assets
1,589 
 
 
 
1,532 
 
 
 
1,589 
1,532 
 
Europe, Middle East and Africa
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
2,377 
2,035 
1,965 
Long-lived assets
2,448 
 
 
 
2,426 
 
 
 
2,448 
2,426 
 
Asia Pacific
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
1,081 
777 
647 
Long-lived assets
561 
 
 
 
562 
 
 
 
561 
562 
 
Total operating segments
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
11,287 
8,512 
7,546 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
1,762 
1,428 
1,103 
Total operating segments |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
11,287 
8,512 
7,546 
Risk Solutions
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
6,817 
6,423 
6,305 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
6,766 
6,369 
6,232 
Fiduciary investment income
 
 
 
 
 
 
 
 
51 
54 
73 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
1,314 
1,194 
900 
Risk Solutions |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
7,537 
6,989 
6,835 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
7,485 
6,935 
6,762 
Fiduciary investment income
 
 
 
 
 
 
 
 
52 
54 
73 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
1,414 
1,307 
1,003 
Retail brokerage
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
5,303 
4,925 
4,747 
Retail brokerage |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
6,022 
5,491 
5,277 
Reinsurance brokerage
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
1,463 
1,444 
1,485 
Reinsurance brokerage |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
1,463 
1,444 
1,485 
HR Solutions
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
4,501 
2,111 
1,267 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
4,500 
2,110 
1,266 
Fiduciary investment income
 
 
 
 
 
 
 
 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
448 
234 
203 
HR Solutions |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
3,781 
1,545 
737 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
3,781 
1,544 
736 
Fiduciary investment income
 
 
 
 
 
 
 
 
 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
348 
121 
100 
Consulting services
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
2,251 
1,387 
1,075 
Consulting services |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
1,532 
821 
545 
Outsourcing
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
2,272 
731 
191 
Outsourcing |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
2,272 
731 
191 
Intrasegment
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
(23)
(8)
 
Intrasegment |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
(23)
(8)
 
Intersegment elimination
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
(31)
(22)
(26)
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
(31)
(22)
(26)
Intersegment elimination |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
(31)
(22)
(26)
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
(31)
(22)
(26)
Unallocated
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
49 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
 
 
49 
Unallocated |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
49 
Commissions, fees and other revenues
 
 
 
 
 
 
 
 
 
 
49 
Unallocated Expense
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
(156)
(202)
(131)
Unallocated Expense |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
(156)
(202)
(131)
Unallocated Revenue
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
49 
Unallocated Revenue |
Move of the Health and Benefits consulting business
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information
 
 
 
 
 
 
 
 
 
 
 
Operating income from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
$ 49 
Quarterly Financial Data (Unaudited) (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Consolidated Statements of Income
 
 
 
 
 
 
 
 
 
 
 
Commissions, fees and other
$ 2,980 
$ 2,708 
$ 2,799 
$ 2,748 
$ 2,897 
$ 1,786 
$ 1,883 
$ 1,891 
$ 11,235 
$ 8,457 
$ 7,521 
Fiduciary investment income
14 
15 
12 
11 
12 
15 
15 
13 
52 
55 
74 
Total revenue
2,994 
2,723 
2,811 
2,759 
2,909 
1,801 
1,898 
1,904 
11,287 
8,512 
7,595 
Operating income
435 
341 
434 
396 
422 
263 
268 
273 
1,606 
1,226 
1,021 
Income from continuing operations
280 
208 
265 
253 
242 
147 
184 
186 
1,006 
759 
681 
Loss from discontinued operations
 
 
(1)
 
(26)
 
(27)
111 
Net income
280 
208 
267 
255 
241 
147 
158 
186 
1,010 
732 
792 
Less: Net income attributable to noncontrolling interests
10 
10 
31 
26 
45 
Net income attributable to Aon stockholders
$ 277 
$ 198 
$ 258 
$ 246 
$ 231 
$ 144 
$ 153 
$ 178 
$ 979 
$ 706 
$ 747 
Basic:
 
 
 
 
 
 
 
 
 
 
 
lncome from continuing operations (in dollars per share)
$ 0.84 
$ 0.59 
$ 0.76 
$ 0.72 
$ 0.68 
$ 0.52 
$ 0.64 
$ 0.65 
$ 2.91 
$ 2.50 
$ 2.25 
Loss from discontinued operations (in dollars per share)
$ 0.01 
 
 
 
 
 
$ (0.09)
 
$ 0.01 
$ (0.09)
$ 0.39 
Net income (in dollars per share)
$ 0.85 
$ 0.59 
$ 0.76 
$ 0.72 
$ 0.68 
$ 0.52 
$ 0.55 
$ 0.65 
$ 2.92 
$ 2.41 
$ 2.64 
Diluted:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations (in dollars per share)
$ 0.82 
$ 0.59 
$ 0.75 
$ 0.71 
$ 0.67 
$ 0.51 
$ 0.63 
$ 0.63 
$ 2.86 
$ 2.46 
$ 2.19 
Loss from discontinued operations (in dollars per share)
$ 0.01 
 
 
 
 
 
$ (0.09)
 
$ 0.01 
$ (0.09)
$ 0.38 
Net income (in dollars per share)
$ 0.83 
$ 0.59 
$ 0.75 
$ 0.71 
$ 0.67 
$ 0.51 
$ 0.54 
$ 0.63 
$ 2.87 
$ 2.37 
$ 2.57 
COMMON STOCK DATA
 
 
 
 
 
 
 
 
 
 
 
Dividends paid per share (in dollars per share)
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.15 
$ 0.60 
$ 0.60 
$ 0.60 
Price range:
 
 
 
 
 
 
 
 
 
 
 
High (in dollars per share)
$ 51.11 
$ 52.17 
$ 54.58 
$ 53.17 
$ 46.24 
$ 40.08 
$ 44.34 
$ 43.16 
$ 54.58 
$ 46.24 
 
Low (in dollars per share)
$ 39.90 
$ 39.68 
$ 48.66 
$ 43.31 
$ 38.72 
$ 35.10 
$ 37.06 
$ 37.33 
$ 39.68 
$ 35.10 
 
Shares outstanding (in shares)
324.4 
323.3 
326.7 
330.5 
332.3 
270.9 
269.7 
269.4 
324.4 
332.3 
 
Average monthly trading volume (in shares)
 
 
 
 
54.4 
80.3 
38.7 
37.2 
 
52.7