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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

EXECUTIVE SUMMARY OF 2021 FINANCIAL RESULTS

Aon plc is a leading global professional services firm providing a broad range of risk, health, and wealth solutions. Through our experience, global reach, and comprehensive analytics, we are better able to help clients meet rapidly changing, increasingly complex, and interconnected challenges. We are committed to accelerating innovation to address unmet and evolving client needs, so that our clients are better informed, better advised, and able to make better decisions to protect and grow their business. Management is focused on strengthening Aon and uniting the firm with one portfolio of capability enabled by data and analytics and one operating model to deliver additional insight, connectivity, and efficiency.

Financial Results

The following is a summary of our 2021 financial results:

•Revenue increased $1.1 billion, or 10%, to $12.2 billion in 2021 compared to 2020, reflecting 9% organic revenue growth and a 2% favorable impact from foreign currency translation, partially offset by a 1% unfavorable impact from divestitures, net of acquisitions.

•Operating expenses increased $1.8 billion, or 22%, to $10.1 billion in 2021 compared to 2020 due primarily to a $1.3 billion increase in charges related to terminating the combination with WTW and related costs, increased expenses associated with 9% organic revenue growth, and a $195 million unfavorable impact from translating prior year period results at current period foreign exchange rates (“foreign currency translation”), partially offset by a $72 million decrease in amortization related to certain tradenames that were fully amortized in the second quarter of 2020 and a $58 million decrease in expenses related to divestitures, net of acquisitions.

•Operating margin decreased to 17.1% in 2021 from 25.1% in 2020. The decrease was driven by an increase in operating expenses as listed above, partially offset by organic revenue growth of 9%.

•Due to the factors set forth above, Net income was $1.3 billion in 2021, a decrease of $0.7 billion, or 35%, from 2020.

•Diluted earnings per share decreased 34% to $5.55 per share during the twelve months of 2021 compared to $8.45 per share for the prior year period.

•Cash flows provided by operating activities was $2.2 billion in 2021, a decrease of $0.6 billion, or 22%, from $2.8 billion in 2020, primarily due to the $1 billion termination fee payment and additional payments related to terminating the combination with WTW, partially offset by strong revenue growth.

We focus on four key metrics not presented in accordance with U.S. GAAP that we communicate to shareholders: organic revenue growth, adjusted operating margin, adjusted diluted earnings per share, and free cash flow. These non-GAAP metrics should be viewed in addition to, not instead of, our Consolidated Financial Statements. The following is our measure of performance against these four metrics for 2021:

•Organic revenue growth, a non-GAAP measure defined under the caption “Review of Consolidated Results — Organic Revenue Growth,” was 9% in 2021, compared to 1% organic growth in the prior year.

•Adjusted operating margin, a non-GAAP measure defined under the caption “Review of Consolidated Results — Adjusted Operating Margin,” was 30.1% in 2021, compared to 28.5% in the prior year. The increase in adjusted operating margin primarily reflects 9% organic revenue growth and a favorable impact from foreign currency translation of $63 million.

•Adjusted diluted earnings per share, a non-GAAP measure defined under the caption “Review of Consolidated Results — Adjusted Diluted Earnings per Share,” was $12.00 per share in 2021, an increase of $2.19 per share, or 22%, from $9.81 per share in 2020. The increase in adjusted diluted earnings per share primarily reflects strong operational performance and effective capital management, highlighted by $3.5 billion of share repurchase during 2021, and a favorable impact from foreign currency translation.

•Free cash flow, a non-GAAP measure defined under the caption “Review of Consolidated Results — Free Cash Flow,” was $2.0 billion in 2021, a decrease of $597 million, or 23%, from $2.6 billion in 2020, reflecting a decrease in cash flows from operations, partially offset by a $4 million decrease in capital expenditures.

BUSINESS OVERVIEW

In the third quarter of 2021, we announced a realignment of our principal service lines to the following: Commercial Risk Solutions, Reinsurance Solutions, Health Solutions, and Wealth Solutions. Realignment to these four solution lines results in the following changes in the presentation of our principal service line reporting:

•Data & Analytic Services’ revenue and organic revenue results, which were previously reported as a separate principal service line and include Affinity, Aon Inpoint, CoverWallet, and ReView, are included within Commercial Risk Solutions.

•Human Capital, which was previously reported within Retirement Solutions, is included within Health Solutions’ revenue and organic revenue results.

•Wealth Solutions includes revenue and organic revenue results for all businesses previously reported within Retirement Solutions, excluding Human Capital.

The changes in the solution line structure affects only the manner in which our revenue and organic revenue results for our principal service lines were previously reported and have no impact our previously reported Consolidated Financial Statements, results of operations, or total organic revenue growth. We continue to operate as one segment that includes all of our operations. See the “Principal Products and Services” section in Part I, Item 1 of this report for information on each of the four principal service lines.

TERMINATION OF BUSINESS COMBINATION AGREEMENT

On March 9, 2020, we and WTW entered into a Business Combination Agreement with respect to a combination of the parties (the “Combination”). The parties’ respective shareholders approved the Combination on August 26, 2020.

On June 16, 2021, the DOJ filed a civil antitrust lawsuit against the Company and WTW in the United States District Court for the District of Columbia seeking to enjoin the Combination. On July 26, 2021, the Company and WTW mutually agreed to terminate the Business Combination Agreement (the “Termination Agreement”). Pursuant to the Termination Agreement, the Business Combination Agreement was terminated and a termination fee of $1 billion (the “Termination Fee”) was paid to WTW. Following the termination, the lawsuit by the DOJ was dismissed.

Aon Corporation, a subsidiary of Aon plc, paid the Termination Fee to WTW on July 27, 2021, reflecting that U.S. business services provided by Aon Corporation and its subsidiaries were the primary focus of the DOJ’s challenge to our proposed combination. The Termination Fee was paid to defend the existing U.S. business of Aon Corporation and to avoid additional remedy divestitures of critical Aon Corporation business segments in the U.S. and the continuing delay and uncertainty in completing the combination.

COVID-19 PANDEMIC

The outbreak of the coronavirus, which causes COVID-19, was declared by the World Health Organization to be a pandemic and has impacted almost all countries, in varying degrees, creating significant public health concerns, and significant volatility, uncertainty, and economic disruption in every region in which we operate. The COVID-19 pandemic has resulted, and may continue to result, in significant economic disruption and volatility, although in recent months progress has been made in the development and distribution of vaccines, contributing to overall improved economic conditions globally, despite recent developments as a result of the Delta and Omicron variants. We continue to closely monitor the situation and its impacts on our business, liquidity, and capital planning initiatives. We continue to be fully operational and to reoccupy certain offices in phases, where deemed appropriate and in compliance with governmental restrictions considering the impact on health and safety of our colleagues, their families, and our clients, and we have restricted or minimized access to offices where appropriate to support the health and safety of our colleagues. We continue to deploy business continuity protocols to facilitate remote working capabilities to ensure the health and safety of our colleagues and to comply with public health and travel guidelines and restrictions.

As the situation continues to evolve, the scale and duration of disruption cannot be predicted, and it is not possible to quantify or estimate the full impact that COVID-19 will have on our business. While we continue to focus on managing our cash flow to meet liquidity needs, our results of operations, particularly with respect to our more discretionary revenues, may be adversely affected. However, for the year ended December 31, 2021, the impacts of COVID-19 on our business results have lessened and we have seen overall strength across the firm. We continue to monitor the situation closely.

The impacts of the pandemic on our business operations and results of operations for the year ended December 31, 2021 are further described in the sections entitled “Review of Consolidated Results” and “Liquidity and Financial Condition” contained in Part II, Item 7 of this report.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE

For many companies, the management of ESG risks and opportunities has become increasingly important. Aon offers a wide range of consulting and advisory solutions designed to address and manage ESG issues for clients. We view ESG risks as presenting an important opportunity to help clients and improve our impact on ESG matters.

REVIEW OF CONSOLIDATED RESULTS

Summary of Results

Our consolidated results are as follow (in millions, except per share data):

Years Ended December 31

Revenue

Expenses

Amortization and impairment of intangible assets 147 246 392

Interest income 11 6 8

Less: Net income attributable to noncontrolling interests 53 49 41

Net income attributable to Aon shareholders $ 1,255 $ 1,969 $ 1,532

Weighted average ordinary shares outstanding - diluted 226.1 233.1 240.6

Consolidated Results for 2021 Compared to 2020

Revenue

Total revenue increased $1.1 billion, or 10%, to $12.2 billion in 2021, compared to $11.1 billion in 2020. The increase was driven by 9% organic revenue growth and a 2% favorable impact from foreign currency translation, partially offset by a 1% unfavorable impact from divestitures, net of acquisitions.

Commercial Risk Solutions revenue increased $774 million, or 13%, to $6.6 billion in 2021, compared to $5.9 billion in 2020. Organic revenue growth was 11% in 2021, reflecting growth across every major geography, driven by strong new business generation, retention, and management of the renewal book portfolio. Strength in retail brokerage was highlighted by double-digit growth in the U.S., Latin America, and Asia. Results also reflect growth in the more discretionary portions of the business, including double-digit growth in transaction solutions and project-related work. On average globally, exposures and pricing were both modestly positive, which resulted in a modestly positive market impact overall.

Reinsurance Solutions revenue increased $183 million, or 10%, to $2.0 billion in 2021, compared to $1.8 billion in 2020. Organic revenue growth was 8% in 2021 driven by strong net new business generation in treaty, as well as solid growth in facultative placements and double-digit growth in capital markets transactions. In addition, market impact was modestly positive on results.

Health Solutions revenue increased $87 million, or 4%, to $2.2 billion in 2021, compared to $2.1 billion in 2020. Organic revenue growth was 10% in 2021 driven by double-digit growth in human capital due to growth in both rewards and assessments solutions. In health and benefits brokerage, solid growth globally in the core was driven by strong retention and management of the renewal book portfolio, as well as growth in the more discretionary portions of the business, including double-digit growth in voluntary benefits and enrollment solutions and project-related work.

Wealth Solutions revenue increased $85 million, or 6%, to $1.4 billion in 2021, compared to $1.3 billion in 2020. Organic revenue growth was 2% in 2021 driven by growth in investments, including solid growth in delegated investment management, as well as growth in retirement, primarily from higher utilization rates and project-related work.

Compensation and Benefits

Compensation and benefits increased $833 million, or 14%, in 2021 compared to 2020. The increase was primarily driven by an increase in expense associated with 9% organic revenue growth, a $245 million increase in charges related to terminating the combination with WTW and related costs, and a $151 million unfavorable impact from foreign currency translation, partially offset by a $17 million decrease in expenses related to divestitures, net of acquisitions.

Information Technology

Information technology, which represents costs associated with supporting and maintaining our infrastructure, increased $33 million, or 7%, in 2021 compared to 2020. The increase was primarily driven by a $17 million increase in charges related to terminating the combination with WTW and related costs, an increase in expense associated with 9% organic revenue growth, investments in long-term growth, and a $5 million unfavorable impact from foreign currency translation.

Premises

Premises, which represents the cost of occupying offices in various locations throughout the world, increased $36 million, or 12%, in 2021 compared to 2020. The increase was primarily driven by a $22 million increase in charges related to terminating the combination with WTW and related costs and a $10 million unfavorable impact from foreign currency translation.

Depreciation of Fixed Assets

Depreciation of fixed assets primarily relates to software, leasehold improvements, furniture, fixtures and equipment, computer equipment, buildings, and automobiles. Depreciation of fixed assets increased $12 million, or 7%, in 2021 compared to 2020. The increase was primarily driven by a $16 million increase in charges related to terminating the combination with WTW and related costs.

Amortization and Impairment of Intangible Assets

Amortization and impairment of intangibles primarily relates to finite-lived tradenames and customer-related, contract-based, and technology assets. Amortization and impairment of intangibles decreased $99 million, or 40%, in 2021 compared to 2020. The decrease was primarily driven by a $72 million decrease from certain tradenames that were fully amortized in the second quarter of 2020.

Other General Expenses

Other general expenses increased $1.0 billion, or 81%, in 2021 compared to 2020. The increase was primarily driven by a $1.0 billion increase in charges related to terminating the combination with WTW and related costs, a $21 million unfavorable impact from foreign currency translation, and an increase in expense associated with 9% organic revenue growth, partially offset by a $37 million decrease in expenses related to divestitures, net of acquisitions.

Interest Income

Interest income represents income earned on operating cash balances and other income-producing investments. It does not include interest earned on Funds held on behalf of clients. Interest income was $11 million in 2021, an increase of $5 million, or 83%, from 2020.

Interest Expense

Interest expense, which represents the cost of our debt obligations, was $322 million in 2021, a decrease of $12 million, or 4%, from 2020. The decrease was primarily driven by lower average outstanding term debt.

Other Income

Other income was $152 million in 2021, compared to $13 million in 2020. Other income in 2021 primarily includes $142 million of gains from the disposal of business, compared to $25 million in 2020.

Income before Income Taxes

Due to factors described above, income before income taxes was $1.9 billion in 2021, a 22% decrease from $2.5 billion in 2020. The decrease was primarily driven by a $1.0 billion increase in charges related to terminating the combination with WTW and related costs, as previously described.

Income Taxes

The effective tax rate on net income was 32.3% in 2021 and 18.2% in 2020. The primary drivers of the 2021 tax rate were the impact of the Termination Fee, the U.K. statutory tax rate increase, and the tax benefit of share-based payments. The U.K. enacted legislation in the second quarter of 2021 which increases the corporate income tax rate from 19% to 25% with effect from April 1, 2023 and the Company remeasured its U.K. deferred tax assets and liabilities accordingly.

The 2020 tax rate was primarily driven by the geographical distribution of income, as well as certain discrete items, primarily the favorable impacts of share-based payments and the release of a valuation allowance.

Net Income Attributable to Aon Shareholders

Net income attributable to Aon shareholders decreased to $1.3 billion, or $5.55 per diluted share, in 2021, compared to $2.0 billion, or $8.45 per diluted share, in 2020.

Consolidated Results for 2020 Compared to 2019

We have elected not to include a discussion of our consolidated results for 2020 compared to 2019 in this report in reliance upon Instruction 1 to Item 303(b) of Regulation S-K. This discussion can be found in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 19, 2021.

Non-GAAP Metrics

In our discussion of consolidated results, we sometimes refer to certain non-GAAP supplemental information derived from consolidated financial information specifically related to organic revenue growth (decline), adjusted operating margin, adjusted diluted earnings per share, free cash flow, and the impact of foreign exchange rate fluctuations on operating results. Management believes that these measures are important to make meaningful period-to-period comparisons and that this supplemental information is helpful to investors. Management also uses these measures to assess operating performance and performance for compensation. This non-GAAP supplemental information should be viewed in addition to, not instead of, our Consolidated Financial Statements.

Organic Revenue Growth (Decline)

We use supplemental information related to organic revenue growth (decline) to help us and our investors evaluate business growth from existing operations. Organic revenue growth (decline) is a non-GAAP measure that includes the impact of intercompany activity and excludes the impact of changes in foreign exchange rates, fiduciary investment income, acquisitions, divestitures, transfers between revenue lines, and gains or losses on derivatives accounted for as hedges. This supplemental information related to organic revenue growth (decline) represents a measure not in accordance with U.S. GAAP and should be viewed in addition to, not instead of, our Consolidated Financial Statements. Industry peers provide similar supplemental information about their revenue performance, although they may not make identical adjustments. A reconciliation of this non-GAAP measure to the reported Total revenue is as follows (in millions, except percentages):

Years Ended

Elimination (19) (17) N/A N/A N/A N/A N/A

Years Ended

Commercial Risk Solutions $ 5,861 $ 5,857 — % — % — % (1) % 1 %

Elimination (17) (14) NA NA NA NA NA

(1)Currency impact is determined by translating last year’s revenue at this year’s foreign exchange rates.

(2)Fiduciary investment income for the years ended December 31, 2021 and 2020 was $8 million and $27 million, respectively.

(3)Organic revenue growth (decline) includes the impact of intercompany activity,changes in foreign exchange rates, fiduciary investment income, acquisitions, divestitures, transfers between revenue lines, and gains or losses on derivatives accounted for as hedges.

Adjusted Operating Margin

We use adjusted operating margin as a non-GAAP measure of core operating performance of the Company. Adjusted operating margin excludes the impact of certain items, as listed below, because management does not believe these expenses reflect our core operating performance. This supplemental information related to adjusted operating margin represents a measure not in accordance with U.S. GAAP, and should be viewed in addition to, not instead of, our Consolidated Financial Statements.

A reconciliation of this non-GAAP measure to reported operating margins is as follows (in millions, except percentages):

Years Ended December 31

Operating income - as reported $ 2,090 $ 2,781

Amortization and impairment of intangible assets 147 246

Operating income - as adjusted $ 3,673 $ 3,150

Operating margin - as reported 17.1 % 25.1 %

Operating margin - as adjusted 30.1 % 28.5 %

(1)As part of the terminated combination with WTW, certain transaction costs have been incurred by us in 2021. These costs may include advisory, legal, accounting, valuation, and other professional or consulting fees related to the combination, including planned divestitures that have been terminated, as well as certain compensation expenses and expenses related to further steps on our Aon United operating model as a result of the termination. Additionally, this includes the $1 billion Termination Fee paid in connection with the termination of the combination.

Adjusted Diluted Earnings per Share

We use adjusted diluted earnings per share as a non-GAAP measure of our core operating performance. Adjusted diluted earnings per share excludes the items identified above, along with pension settlements and related income taxes, because management does not believe these expenses are representative of our core earnings. This supplemental information related to adjusted diluted earnings per share represents a measure not in accordance with U.S. GAAP and should be viewed in addition to, not instead of, our Consolidated Financial Statements. A reconciliation of this non-GAAP measure to reported diluted earnings per share is as follows (in millions, except per share data and percentages):

U.S. GAAP Adjustments Non-GAAP Adjusted

Interest income 11 — 11

Less: Net income attributable to noncontrolling interests 53 — 53

Net income attributable to Aon shareholders $ 1,255 $ 1,459 $ 2,714

Weighted average ordinary shares outstanding — diluted 226.1 — 226.1

Effective tax rates (2) 32.3 % 18.4 %

U.S. GAAP Adjustments Non-GAAP Adjusted

Interest income 6 — 6

Less: Net income attributable to noncontrolling interests 49 — 49

Net income attributable to Aon shareholders $ 1,969 $ 318 $ 2,287

Weighted average ordinary shares outstanding — diluted 233.1 — 233.1

Effective tax rates (2) 18.2 % 17.6 %

(1)Adjusted Other income excludes gains from dispositions of $124 million, for the year ended December 31, 2021.

(2)Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with accelerated tradename amortization, impairment charges, certain gains from dispositions, and certain transaction costs and other charges related to the combination and resulting termination, which are adjusted at the related jurisdictional rate. In addition, income tax expense for the year ended December 30, 2021 excludes the impact of remeasuring the net deferred tax liabilities in the U.K. as a result of the corporate income tax rate increase enacted in the second quarter of 2021.

(3)There was $1 million of income for the year ended December 31, 2020, including the related tax effect, from discontinued operations recognized in Net Income from discontinued operations in the Consolidated Statement of Income.

Free Cash Flow

We use free cash flow, defined as cash flow provided by operations minus capital expenditures, as a non-GAAP measure of our core operating performance and cash generating capabilities of our business operations. This supplemental information related to free cash flow represents a measure not in accordance with U.S. GAAP and should be viewed in addition to, not instead of, the Consolidated Financial Statements. The use of this non-GAAP measure does not imply or represent the residual cash flow for discretionary expenditures. A reconciliation of this non-GAAP measure to cash flow provided by operations is as follows (in millions):

Years Ended December 31

Cash provided by operating activities $ 2,182 $ 2,783

Capital expenditures (137) (141)

Impact of Foreign Currency Exchange Rate Fluctuations

Because we conduct business in more than 120 countries, foreign currency exchange rate fluctuations have a significant impact on our business. Foreign currency exchange rate movements may be significant and may distort true period-to-period comparisons of changes in revenue or pretax income. Therefore, to give financial statement users meaningful information about our operations, we have provided an illustration of the impact of foreign currency exchange rate fluctuations on our financial results. The methodology used to calculate this impact isolates the impact of the change in currencies between periods by translating the prior year’s revenue, expenses, and net income using the current year’s foreign currency exchange rates.

Currency fluctuations had a favorable impact of $0.17 on earnings per diluted share during the year ended December 31, 2021 if prior year period results were translated at current period foreign exchange rates. Currency fluctuations had an unfavorable impact of $0.03 on earnings per diluted share during the year ended December 31, 2020, if 2019 results were translated at 2020 rates.

Currency fluctuations had a favorable impact of $0.23 on adjusted earnings per diluted share during the year ended December 31, 2021 if prior year period results were translated at current period foreign exchange rates. Currency fluctuations had an unfavorable impact of $0.04 on adjusted earnings per diluted share during the year ended December 31, 2020, if 2019

results were translated at 2020 rates. These translations are performed for comparative and illustrative purposes only and do not impact the accounting policies or practices for amounts included in our Financial Statements.

LIQUIDITY AND FINANCIAL CONDITION

Liquidity

Executive Summary

We believe that our balance sheet and strong cash flow provide us with adequate liquidity. Our primary sources of liquidity in the near-term include cash flows provided by operations and available cash reserves; primary sources of liquidity in the long-term include cash flows provided by operations, debt capacity available under our credit facilities and capital markets. Our primary uses of liquidity are operating expenses and investments, capital expenditures, acquisitions, share repurchases, pension obligations, and shareholder dividends. We believe that cash flows from operations, available credit facilities, available cash reserves, and the capital markets will be sufficient to meet our liquidity needs, including principal and interest payments on debt obligations, capital expenditures, pension contributions, and anticipated working capital requirements in the next twelve months and over the long-term. Although there continues to be uncertainties around future economic conditions due to COVID-19, we have largely returned to normal levels of liquidity and will continue to monitor our needs as economic conditions change.

In the third quarter of 2021, the Combination with WTW was terminated and on July 27, 2021, we paid the Termination Fee of $1 billion. Refer to “Termination of Business Combination Agreement” within Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information. The Termination Fee, along with other payments made in the third and fourth quarters related to terminating the combination with WTW, are reflected as an outflow to operating activities.

Cash on our balance sheet includes funds available for general corporate purposes, as well as amounts restricted as to their use. Funds held on behalf of clients in a fiduciary capacity are segregated and shown together with uncollected insurance premiums and claims in Fiduciary assets in the Consolidated Statements of Financial Position, with a corresponding amount in Fiduciary liabilities.

In our capacity as an insurance broker or agent, we collect premiums from insureds and, after deducting our commission, remit the premiums to the respective insurance underwriters. We also collect claims or refunds from underwriters on behalf of insureds, which are then returned to the insureds. Unremitted insurance premiums and claims are held by us in a fiduciary capacity. The levels of funds held on behalf of clients and liabilities can fluctuate significantly depending on when we collect the premiums, claims, and refunds, make payments to underwriters and insureds, and collect funds from clients and make payments on their behalf, and upon the impact of foreign currency movements. Funds held on behalf of clients, because of their nature, are generally invested in very liquid securities with highly rated, credit-worthy financial institutions. Fiduciary assets include funds held on behalf of clients comprised of cash and cash equivalents of $6.1 billion and $5.7 billion at December 31, 2021 and 2020, and fiduciary receivables of $8.3 billion and $8.1 billion at December 31, 2021 and 2020, respectively. While we earn investment income on the funds held in cash and money market funds, the funds cannot be used for general corporate purposes.

We maintain multi-currency cash pools with third-party banks in which various Aon entities participate. Individual Aon entities are permitted to overdraw on their individual accounts provided the overall global balance does not fall below zero. At December 31, 2021, non-U.S. cash balances of one or more entities may have been negative; however, the overall balance was positive.

The following table summarizes our Cash and cash equivalents, Short-term investments, and Fiduciary assets as of December 31, 2021 (in millions):

Statement of Financial Position Classification

Asset Type Cash and cashequivalents Short-terminvestments Fiduciaryassets Total

Cash and cash equivalents and Funds held on behalf of clients increased $72 million in 2021 compared to 2020. A summary of our cash flows provided by and used for operating, investing, and financing activities is as follows (in millions):

Years Ended December 31

Cash provided by operating activities $ 2,182 $ 2,783

Cash provided by (used for) investing activities $ 49 $ (679)

Cash used for financing activities $ (1,924) $ (1,772)

(1) Certain amounts on the Consolidated Statements of Cash Flows as presented in our financial statements previously filed in the Company’s Annual Reports on Form 10-K have been restated. Refer to Note 1 “Basis of Presentation” of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this report.

Operating Activities

Net cash provided by operating activities during the year ended December 31, 2021 decreased $601 million, or 22%, from the prior year to $2,182 million. This amount represents net income reported, as adjusted for gains or losses on sales of businesses, share-based compensation expense, depreciation expense, amortization and impairments, and other non-cash income and expenses, as well as changes in working capital that relate primarily to the timing of payments of accounts payable and accrued liabilities and the collection of receivables.

Pension Contributions

Pension contributions were $87 million for the year ended December 31, 2021, as compared to $120 million for the year ended December 31, 2020. In 2022, we expect to contribute approximately $74 million in cash to our pension plans, including contributions to non-U.S. pension plans, which are subject to changes in foreign exchange rates.

Investing Activities

Cash flows provided by investing activities during the year ended December 31, 2021 were $49 million, an increase of $728 million compared to prior year. Generally, the primary drivers of cash flows provided by investing activities are sales of businesses, sales of short-term investments, and proceeds from investments. Generally, the primary drivers of cash flows used for investing activities are acquisition of businesses, purchases of short-term investments, capital expenditures, and payments for investments. The gains and losses corresponding to cash flows provided by proceeds from investments and used for payments for investments are primarily recognized in Other income in the Consolidated Statements of Income.

Short-term Investments

Short-term investments decreased $16 million at December 31, 2021 as compared to December 31, 2020. As disclosed in Note 14 “Fair Value Measurements and Financial Instruments” of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this report, the majority of our investments carried at fair value are money market funds. These money market funds are held throughout the world with various financial institutions. We are not aware of any market liquidity issues that would materially impact the fair value of these investments.

Acquisitions and Dispositions of Businesses

During 2021, the Company completed the acquisition of two businesses for consideration of $14 million, net of cash and funds held on behalf of clients, and the disposition of six businesses for a $218 million cash inflow, net of cash and funds held on behalf of clients.

During 2020, the Company completed the acquisition of six businesses for consideration of $368 million, net of cash and funds held on behalf of clients, and the disposition of one business for a $30 million cash inflow, net of cash and funds held on behalf of clients.

Capital Expenditures

The Company’s additions to fixed assets, including capitalized software, which amounted to $137 million in 2021 and $141 million in 2020, primarily related to the refurbishing and modernizing of office facilities, software development costs, and computer equipment purchases.

Financing Activities

Cash flows used for financing activities during the year ended December 31, 2021 was $1,924 million, an increase of $152 million compared to prior year. Generally, the primary drivers of cash flows used for financing activities are issuances of debt, net of repayments, share repurchases, change in net fiduciary liabilities, dividends paid to shareholders, issuances of shares for employee benefit plans, transactions with noncontrolling interests, and other financing activities, such as collection of or payments for deferred consideration in connection with prior-year business acquisitions and divestitures.

Share Repurchase Program

We have a share repurchase program authorized by our Board of Directors. The Repurchase Program was established in April 2012 with $5.0 billion in authorized repurchases, and was increased by $5.0 billion in authorized repurchases in each of November 2014, June 2017, and November 2020, and by $7.5 billion in authorized repurchases in February 2022 for a total of $27.5 billion in repurchase authorizations.

The following table summarizes the Company’s Share Repurchase activity (in millions, except per share data):

Years Ended December 31

Shares repurchased 12.4 8.5

Costs recorded to retained earnings

Additional associated costs — 2

Total costs recorded to retained earnings $ 3,543 $ 1,763

At December 31, 2021, the remaining authorized amount for share repurchase under the Repurchase Program was approximately $1.7 billion. Under the Repurchase Program, we have repurchased a total of 149.6 million shares for an aggregate cost of approximately $18.3 billion.

Borrowings

Total debt at December 31, 2021 was $9.4 billion, an increase of $1.7 billion compared to December 31, 2020. Commercial paper activity during the years ended December 31, 2021 and 2020 is as follows (in millions):

Years Ended December 31

Net issuances (repayments) $ 671 $ (113)

(1) The proceeds of the commercial paper issuances were used primarily for short-term working capital needs.

Commercial paper may be issued in aggregate principal amounts of up to $1 billion under the U.S. Program and €625 million under the European Program, not to exceed the amount of our committed credit facilities, which was $1.75 billion at December 31, 2021. The aggregate capacity of the U.S. Program was increased in the fourth quarter of 2021 from $900 million to $1 billion. The aggregate capacity of the Commercial Paper Program remains fully backed by our committed credit facilities.

Proceeds from commercial paper issued by Aon Corporation under the U.S. Program, where the aggregate principal was raised on July 26, 2021, were used to pay approximately $400 million of the Termination Fee on July 27, 2021.

On December 2, 2021, Aon Corporation, a Delaware corporation, and Aon Global Holdings plc, a public limited company incorporated under the laws of England and Wales, co-issued $500 million aggregate principal amount of 2.60% Senior Notes set to mature on December 2, 2031. We intend to use the net proceeds of the offering for general corporate purposes.

In November 2021, the Company’s $500 million 2.20% Senior Notes due November 2022 were classified as Short-term debt and current portion of long-term debt in the Consolidated Statements of Financial Position as the date of maturity is in less than one year as of December 31, 2021.

On August 23, 2021, Aon Corporation, a Delaware corporation, and Aon Global Holdings plc, a public limited company formed under the laws of England and Wales, both wholly owned subsidiaries of the Company, co-issued $400 million of 2.05% Senior Notes due August 2031 and $600 million of 2.90% Senior Notes due August 2051. We intend to use the net proceeds from the offering for general corporate purposes.

On January 13, 2021, Aon Global Limited, a limited company organized under the laws of England and Wales and a wholly owned subsidiary of Aon plc, issued an irrevocable notice of redemption to holders of its 2.80% Senior Notes for the redemption of all $400 million outstanding aggregate principal amount of the notes, which were set to mature in March 2021 and classified as Short-term debt and current portion of long-term debt as of December 31, 2020. The redemption date was on February 16, 2021 and resulted in an insignificant loss due to extinguishment.

On May 29, 2020, Aon Corporation, a Delaware corporation and a wholly owned subsidiary of the Company, issued an irrevocable notice of redemption to holders of its 5.00% Senior Notes, which were set to mature on September 30, 2020, for the redemption of all $600 million outstanding aggregate principal amount of the notes. The redemption date was on June 30, 2020 and resulted in a loss of $7 million due to extinguishment.

On May 12, 2020, Aon Corporation issued $1 billion 2.80% Senior Notes due May 2030. Aon Corporation used a portion of the net proceeds on June 30, 2020 to repay its outstanding 5.00% Senior Notes, which were set to mature on September 30, 2020. We used the remainder to repay other borrowings and for general corporate purposes.

Other Liquidity Matters

Distributable Profits

We are required under Irish law to have available “distributable profits” to make share repurchases or pay dividends to shareholders. Distributable profits are created through the earnings of the Irish parent company and, among other methods, through intercompany dividends or a reduction in share capital approved by the High Court of Ireland. Distributable profits are not linked to a U.S. GAAP reported amount (e.g. retained earnings). On July 16, 2021, we received approval from the High Court of Ireland to complete a reduction in share premium to create distributable profits of $34.0 billion to support the payment of possible future dividends or future share repurchases, if and to the extent declared by the directors in compliance with their duties under Irish law. As of December 31, 2021 and December 31, 2020, we had distributable profits in excess of $32.7 billion and $0.2 billion, respectively. We believe that we will have sufficient distributable profits for the foreseeable future.

Credit Facilities

We expect cash generated by operations for 2021 to be sufficient to service our debt and contractual obligations, finance capital expenditures, and continue to pay dividends to our shareholders. Although cash from operations is expected to be sufficient to service these activities, we have the ability to access the commercial paper markets or borrow under our credit facilities to accommodate any timing differences in cash flows. Additionally, under current market conditions, we believe that we could access capital markets to obtain debt financing for longer-term funding, if needed.

As of December 31, 2021, we had two primary committed credit facilities outstanding: our $1.0 billion multi-currency U.S. credit facility expiring in September 2026 and our $750 million multi-currency U.S. credit facility expiring in October 2023. In aggregate, these two facilities provide $1.75 billion in available credit. The $1.0 billion credit facility was entered into on September 28, 2021 and replaced the $900 million credit facility, which was scheduled to mature on February 2, 2022.

Each of these primary committed credit facilities includes customary representations, warranties, and covenants, including financial covenants that require us to maintain specified ratios of adjusted consolidated EBITDA to consolidated interest expense and consolidated debt to consolidated adjusted EBITDA, tested quarterly. At December 31, 2021, we did not have borrowings under either facility, and we were in compliance with the financial covenants and all other covenants contained therein during the rolling year ended December 31, 2021.

Shelf Registration Statement

On May 12, 2020, we filed a shelf registration statement with the SEC, registering the offer and sale from time to time of an indeterminate amount of, among other securities, debt securities, preference shares, Class A Ordinary Shares and convertible securities. Our ability to access the market as a source of liquidity is dependent on investor demand, market conditions, and other factors.

Rating Agency Ratings

The major rating agencies’ ratings of our debt at February 18, 2022 appear in the table below.

Ratings

Senior Long-term Debt Commercial Paper Outlook

Standard & Poor’s A- A-2 Stable

Moody’s Investor Services Baa2 P-2 Stable

Fitch, Inc. BBB+ F-2 Stable

Guarantees in Connection with the Sale of the Divested Business

In connection with the sale of the Divested Business, we guaranteed future operating lease commitments related to certain facilities assumed by the Buyer. We are obligated to perform under the guarantees if the Divested Business defaults on the leases at any time during the remainder of the lease agreements, which expire on various dates through 2025. As of December 31, 2021, the undiscounted maximum potential future payments under the lease guarantee were $40 million, with an estimated fair value of $5 million. No cash payments were made in connection to the lease commitments during the year ended December 31, 2021.

Additionally, we are subject to performance guarantee requirements under certain client arrangements that were assumed by the Buyer. Should the Divested Business fail to perform as required by the terms of the arrangements, we would be required to fulfill the remaining contract terms, which expire on various dates through 2023. As of December 31, 2021, the undiscounted maximum potential future payments under the performance guarantees were $52 million, with an estimated fair value of less than $1 million. No cash payments were made in connection to the performance guarantees during the year ended December 31, 2021.

Letters of Credit and Other Guarantees

We have entered into a number of arrangements whereby our performance on certain obligations is guaranteed by a third party through the issuance of an LOC. We had total LOCs outstanding of approximately $75 million at December 31, 2021, compared to $79 million at December 31, 2020. These LOCs cover the beneficiaries related to certain of our U.S. and Canadian non-qualified pension plan schemes and secure deductible retentions for our own workers’ compensation program. We also have obtained LOCs to cover contingent payments for taxes and other business obligations to third parties, and other guarantees for miscellaneous purposes at our international subsidiaries.

We have 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 $153 million at December 31, 2021, compared to $113 million at December 31, 2020.

Contractual Obligations

Our contractual obligations and commitments as of December 31, 2021 are comprised of principal payments on debt, interest payments on debt, operating leases, pension and other postretirement benefit plans, and purchase obligations.

Operating leases are primarily comprised of leased office space throughout the world. As leases expire, we do not anticipate difficulty in negotiating renewals or finding other satisfactory space if the premise becomes unavailable. In certain circumstances, we may have unused space and may seek to sublet such space to third parties, depending upon the demands for office space in the locations involved. Refer to Note 8 “Lease Commitments” of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this report for further information.

Pension and other postretirement benefit plan obligations include estimates of our minimum funding requirements pursuant to the ERISA and other regulations, as well as minimum funding requirements agreed with the trustees of our U.K. pension plans. Additional amounts may be agreed to with, or required by, the U.K. pension plan trustees. Nonqualified pension and other postretirement benefit obligations are based on estimated future benefit payments. We may make additional discretionary contributions. Refer to Note 11 “Employee Benefits” of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this report for further information.

Purchase obligations are defined as agreements to purchase goods and services that are enforceable and legally binding on us, and that specifies all significant terms, including the goods to be purchased or services to be rendered, the price at which the goods or services are to be rendered, and the timing of the transactions. Most of our purchase obligations are related to purchases of information technology services or other service contracts.

We had no other cash requirements from known contractual obligations and commitments that have, or are reasonably likely to have, a current or future material effect on the Company’s financial condition, results of operations, or liquidity.

Guarantee of Registered Securities

In connection with the Reorganization, on April 1, 2020 Aon plc and Aon Global Holdings plc, a company incorporated under the laws of England and Wales, entered into various agreements pursuant to which they agreed to guarantee the obligations of Aon Corporation arising under issued and outstanding debt securities, which were previously guaranteed solely by Aon Global Limited and the obligations of Aon Global Limited arising under issued and outstanding debt securities, which were previously guaranteed solely by Aon Corporation. Those agreements include: (1) Second Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, and Aon Global Holdings plc and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”) (amending and restating the Amended and Restated Indenture, dated April 2, 2012, among Aon Corporation, Aon Global Limited and the Trustee); (2) Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, Aon Global Holdings plc and the Trustee (amending and restating the Indenture, dated December 12, 2012, among Aon Corporation, Aon Global Limited plc and the Trustee); (3) Second Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, Aon Global Holdings plc and the Trustee (amending and restating the Amended and Restated Indenture, dated May 20, 2015, among Aon Corporation, Aon Global Limited and the Trustee); (4) Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, Aon Global Holdings plc and the Trustee (amending and restating the Indenture, dated November 13, 2015, among Aon Corporation, Aon Global Limited and the Trustee); and (5) Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, Aon Global Holdings plc and the Trustee (amending and restating the Indenture, dated December 3, 2018, among Aon Corporation, Aon Global Limited and the Trustee).

After the Reorganization, newly issued and outstanding debt securities by Aon Corporation are guaranteed by Aon Global Limited, Aon plc, and Aon Global Holdings plc, and include the following (collectively, the “Aon Corporation Notes”):

Aon Corporation Notes

2.20% Senior Notes due November 2022

8.205% Junior Subordinated Notes due January 2027

4.50% Senior Notes due December 2028

6.25% Senior Notes due September 2040

All guarantees of Aon plc, Aon Global Limited, and Aon Global Holdings plc of the Aon Corporation Notes are joint and several as well as full and unconditional. Senior Notes rank pari passu in right of payment with all other present and future unsecured debt which is not expressed to be subordinate or junior in rank to any other unsecured debt of the company. There are no subsidiaries other than those listed above that guarantee the Aon Corporation Notes.

After the Reorganization, newly issued and outstanding debt securities by Aon Global Limited are guaranteed by Aon plc, Aon Global Holdings plc, and Aon Corporation, and include the following (collectively, the “Aon Global Limited Notes”):

Aon Global Limited Notes

4.00% Senior Notes due November 2023

4.25% Senior Notes due December 2042

All guarantees of Aon plc, Aon Global Holdings plc, and Aon Corporation of the Aon Global Limited Notes are joint and several as well as full and unconditional. Senior Notes rank pari passu in right of payment with all other present and future

unsecured debt which is not expressed to be subordinate or junior in rank to any other unsecured debt of the company. There are no subsidiaries other than those listed above that guarantee the Aon Global Limited Notes.

Newly co-issued and outstanding debt securities by Aon Corporation and Aon Global Holdings plc (together, the “Co-Issuers”) are guaranteed by Aon plc and Aon Global Limited and include the following (collectively, the “Co-Issued Notes”):

Co-Issued Notes - Aon Corporation and Aon Global Holdings plc

2.60% Senior Notes due December 2031

All guarantees of Aon plc and Aon Global Limited of the Co-Issued Notes are joint and several as well as full and unconditional. Senior Notes rank pari passu in right of payment with all other present and future unsecured debt which is not expressed to be subordinate or junior in rank to any other unsecured debt of the Co-Issuers. There are no subsidiaries other than those listed above that guarantee the Co-Issued Notes.

Aon Corporation, Aon Global Limited, and Aon Global Holdings plc are indirect wholly owned subsidiaries of Aon plc. Aon plc, Aon Global Limited, Aon Global Holdings plc, and Aon Corporation together comprise the “Obligor group”. The following tables set forth summarized financial information for the Obligor group.

Adjustments are made to the tables to eliminate intercompany balances and transactions between the Obligor group. Intercompany balances and transactions between the Obligor group and non-guarantor subsidiaries are presented as separate line items within the summarized financial information. These balances are presented on a net presentation basis, rather than a gross basis, as this better reflects the nature of the intercompany positions and presents the funding or funded position that is to be received or owed. No balances or transactions of non-guarantor subsidiaries are presented in the summarized financial information, including investments of the Obligor group in non-guarantor subsidiaries. Summarized Statement of Income information for the Obligor group is as follows (in millions):

Obligor Group

Summarized Statement of Income Information

Revenue $ —

Operating loss $ (1,156)

Expense from non-guarantor subsidiaries before income taxes $ (778)

Net loss attributable to Aon shareholders $ (2,120)

Summarized Statement of Financial Position information for the Obligor group is as follows (in millions):

Obligor Group

Summarized Statement of Financial Position Information

Receivables due from non-guarantor subsidiaries $ 1,646

Other current assets 57

Total current assets $ 1,703

Non-current receivables due from non-guarantor subsidiaries $ 498

Other non-current assets 882

Total non-current assets $ 1,380

Payables to non-guarantor subsidiaries $ 13,509

Other current liabilities 2,013

Total current liabilities $ 15,522

Non-current payables to non-guarantor subsidiaries $ 7,139

Other non-current liabilities 9,512

Total non-current liabilities $ 16,651

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. To prepare these financial statements, we make estimates, assumptions, and judgments that affect what we report as our assets and liabilities, what we disclose as contingent assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of revenues and expenses during the periods presented.

In accordance with our policies, we regularly evaluate our estimates, assumptions, and judgments, including, but not limited to, those concerning revenue recognition, pensions, goodwill and other intangible assets, contingencies, share-based payments, and income taxes, and base our estimates, assumptions, and judgments on our historical experience and on factors we believe reasonable under the circumstances. The results involve judgments about the carrying values of assets and liabilities not readily apparent from other sources. If our assumptions or conditions change, the actual results we report may differ from these estimates. We believe the following critical accounting policies affect the more significant estimates, assumptions, and judgments we use to prepare these Consolidated Financial Statements.

Revenue Recognition

The Company recognizes revenue when control of the promised services is transferred to the customer in the amount that best reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements where control is transferred over time, an input or output method is applied that represents a faithful depiction of the progress towards completion of the performance obligation. For arrangements that include variable consideration, the Company assesses whether any amounts should be constrained. For arrangements that include multiple performance obligations, the Company allocates consideration based on their relative fair values.

Costs incurred by the Company in obtaining a contract are capitalized and amortized on a systematic basis that is consistent with the transfer of control of the services to which the asset relates, considering anticipated renewals when applicable. Certain contract related costs, including pre-placement brokerage costs, are capitalized as a cost to fulfill and are amortized on a systematic basis consistent with the transfer of control of the services to which the asset relates, which is generally less than one year.

to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements recognized over time, various output measures, including units transferred and time elapsed, are utilized to provide a faithful depiction of the progress towards completion of the performance obligation. Revenue is recorded net of allowances for estimated policy cancellations, which are determined based on an evaluation of historical and current cancellation data. Commissions and fees for brokerage services may be invoiced near the effective date of the underlying policy or over the term of the arrangement in installments during the policy period.

Reinsurance Solutions includes treaty reinsurance, facultative reinsurance, and capital markets. Revenue primarily includes reinsurance commissions and fees for services rendered. Revenue is predominantly recognized at a point in time upon the effective date of the underlying policy (or policies), or for a limited number of arrangements, over the term of the arrangement using output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements recognized over time, various output measures, including units delivered and time elapsed, are utilized to provide a faithful depiction of the progress towards completion of the performance obligation. Commissions and fees for brokerage services may be invoiced at the inception of the reinsurance period for certain reinsurance brokerage, or more commonly, over the term of the arrangement in installments based on deposit or minimum premiums for most treaty reinsurance arrangements.

Health Solutions includes consulting and brokerage, Human Capital, and voluntary benefits and enrollment solutions. Revenue primarily includes insurance commissions and fees for services rendered. For brokerage commissions, revenue is predominantly recognized at the effective date of the underlying policy (or policies), or for a limited number of arrangements, over the term of the arrangement to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services using input or output measures, including units delivered or time elapsed, to provide a faithful depiction of the progress towards completion of the performance obligation. For Human Capital, revenue is recognized over time or at a point in time upon completion of the services. For arrangements recognized over time, revenue is based on a measure of progress that depicts the transfer of control of the services to the customer utilizing an appropriate input or output measure to provide a faithful depiction of the progress towards completion of the performance obligation, including units delivered or time elapsed. Input and output measures utilized vary based on the arrangement but typically include reports provided or days elapsed. Revenue from voluntary benefits and enrollment solutions arrangements are typically recognized upon successful enrollment of participants. Commissions and fees for brokerage services may be invoiced at the effective date of the underlying policy or over the term of the arrangement in installments during the policy period. Payment terms for other services vary but are typically over the contract term in installments.

Wealth Solutions includes retirement consulting, pension administration and investments. Revenue recognized for these arrangements is predominantly recognized over the term of the arrangement using input or output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. For consulting arrangements recognized over time, revenue will be recognized based on a measure of progress that depicts the transfer of control of the services to the customer, utilizing an appropriate input or output measure to provide a reasonable assessment of the progress towards completion of the performance obligation including units delivered or time elapsed. Fees paid by customers for consulting services are typically charged on an hourly, project or fixed-fee basis, and revenue for these arrangements is typically recognized based on time incurred, days elapsed, or reports delivered. Revenue from time-and-materials or cost-plus arrangements are recognized as services are performed using input or output measures to provide a reasonable assessment of the progress towards completion of the performance obligation including hours worked, and revenue for these arrangements is typically recognized based on time and materials incurred. Reimbursements received for out-of-pocket expenses are generally recorded as a component of revenue. Payment terms vary but are typically over the contract term in installments.

Pensions

We sponsor defined benefit pension plans throughout the world. Our most significant plans are located in the U.S., the U.K., the Netherlands, and Canada, which are closed to new entrants. We have ceased crediting future benefits relating to salary and services for our U.S., U.K., Netherlands, and Canada plans to the extent statutorily permitted.

The service cost component of net periodic benefit cost is reported in Compensation and benefits and all other components are reported in Other income. We used a full-yield curve approach in the estimation of the service and interest cost components of net periodic pension and postretirement benefit cost for our major pension and other postretirement benefit plans; this was obtained by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

Recognition of Gains and Losses and Prior Service

Certain changes in the value of the obligation and in the value of plan assets, which may occur due to various factors such as changes in the discount rate and actuarial assumptions, actual demographic experience, and/or plan asset performance are not immediately recognized in net income. Such changes are recognized in Other comprehensive income and are amortized into net income as part of the net periodic benefit cost.

Unrecognized gains and losses that have been deferred in Other comprehensive income, as previously described, are amortized into expense as a component of periodic pension expense based on the average life expectancy of the U.S., U.K., Netherlands, and Canada plan members. We amortize any prior service expense or credits that arise as a result of plan changes over a period consistent with the amortization of gains and losses.

As of December 31, 2021, our pension plans have deferred losses that have not yet been recognized through income in the Consolidated Financial Statements. We amortize unrecognized actuarial losses outside of a corridor, which is defined as 10% of the greater of market-related value of plan assets or PBO. To the extent not offset by future gains, incremental amortization as calculated above will continue to affect future pension expense similarly until fully amortized.

The following table discloses our accumulated other comprehensive loss, the number of years over which we are amortizing the loss, and the estimated 2022 amortization of loss by country (in millions, except amortization period):

U.K. U.S. Other

Accumulated other comprehensive loss $ 1,255 $ 1,551 $ 483

The U.S. had no unrecognized prior service cost (credit) at December 31, 2021. The unrecognized prior service cost (credit) at December 31, 2021 was $40 million, and $(6) million for the U.K. and other plans, respectively.

For the U.S. pension plans, we use a market-related valuation of assets approach to determine the expected return on assets, which is a component of net periodic benefit cost recognized in the Consolidated Statements of Income. This approach recognizes 20% of any gains or losses in the current year’s value of market-related assets, with the remaining 80% spread over the next four years. As this approach recognizes gains or losses over a five-year period, the future value of assets and therefore, our net periodic benefit cost will be impacted as previously deferred gains or losses are recorded. As of December 31, 2021, the market-related value of assets was $2.2 billion. We do not use the market-related valuation approach to determine the funded status of the U.S. plans recorded in the Consolidated Statements of Financial Position. Instead, we record and present the funded status in the Consolidated Statements of Financial Position based on the fair value of the plan assets. As of December 31, 2021, the fair value of plan assets was $2.4 billion. Our non-U.S. plans use fair value to determine expected return on assets.

Rate of Return on Plan Assets and Asset Allocation

The following table summarizes the expected long-term rate of return on plan assets for future pension expense as of December 31, 2021:

U.K. U.S. Other

In determining the expected rate of return for the plan assets, we analyze investment community forecasts and current market conditions to develop expected returns for each of the asset classes used by the plans. In particular, we surveyed multiple third-party financial institutions and consultants to obtain long-term expected returns on each asset class, considered historical performance data by asset class over long periods, and weighted the expected returns for each asset class by target asset allocations of the plans.

The U.S. pension plan asset allocation is based on approved allocations following adopted investment guidelines. The investment policy for U.K. and other non-U.S. pension plans is generally determined by the plans’ trustees. Because there are several pension plans maintained in the U.K. and other non-U.S. categories, our target allocation presents a range of the target allocation of each plan. Target allocations are subject to change.

Impact of Changing Economic Assumptions

Changes in the discount rate and expected return on assets can have a material impact on pension obligations and pension expense.

Holding all other assumptions constant, the following table reflects what a 25 BPS increase and decrease in our discount rate would have on our PBO at December 31, 2021 (in millions):

Increase Decrease

U.S. plans $ (89) $ 93

Other plans $ (64) $ 69

(1)Increases to the PBO reflect increases to our pension obligations, while decreases in the PBO are recoveries toward fully-funded status. A change in the discount rate has an inverse relationship to the PBO.

Holding all other assumptions constant, the following table reflects what a 25 BPS increase and decrease in our discount rate would have on our estimated 2022 pension expense (in millions):

25 BPS Change in Discount Rate

Increase (decrease) in expense Increase Decrease

U.K. plans $ (1) $ 1

U.S. plans $ 2 $ (2)

Other plans $ 1 $ (1)

Holding all other assumptions constant, the following table reflects what a 25 BPS increase and decrease in our long-term rate of return on plan assets would have on our estimated 2022 pension expense (in millions):

25 BPS Change in Long-Term Rate of Return on Plan Assets

Increase (decrease) in expense Increase Decrease

U.K. plans $ (15) $ 15

U.S. plans $ (5) $ 5

Other plans $ (4) $ 4

The net unfunded pension balance has continued to improve in 2021, reflecting continued progress in reducing the funded status at risk. As a result, the potential impact of a hypothetical adverse change in discount rates and return seeking asset exposures would have a less significant impact as compared to prior years. A hypothetical discount rates decrease of 1% and return seeking assets decline of 10% would have resulted in expected balance sheet deterioration at 2021 of approximately $235 million, as compared to approximately $410 million in 2019, an improvement of approximately $175 million. This is largely due to greater amounts of liability matching assets and de-risking actions.

Estimated Future Contributions

We estimate cash contributions of approximately $74 million to our pension plans in 2022 as compared with cash contributions of $87 million in 2021.

Goodwill and Other Intangible Assets

Goodwill represents the excess of cost over the fair market value of the net assets acquired. We classify our intangible assets acquired as either tradenames, customer-related and contract-based, or technology and other.

Goodwill is not amortized, but rather tested for impairment at least annually in the fourth quarter. We test more frequently if there are indicators of impairment or whenever business circumstances suggest that the carrying value of goodwill may not be recoverable. These indicators may include a sustained significant decline in our share price and market capitalization, a decline in our expected future cash flows, or a significant adverse change in legal factors or in the business climate, among others.

We perform impairment reviews at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a “component”). A component of an operating segment is a reporting unit if the component

constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. An operating segment shall be deemed to be a reporting unit if all of its components are similar, if none of its components are a reporting unit, or if the segment comprises only a single component.

When evaluating these assets for impairment, we may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, then the goodwill impairment test becomes a quantitative analysis. If the fair value of a reporting unit is determined to be greater than the carrying value of the reporting unit, goodwill is deemed not to be impaired and no further testing is necessary. If the fair value of a reporting unit is less than the carrying value, a goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value limited to the total amount of the goodwill allocated to the reporting unit.

In determining the fair value of our reporting units, we use a DCF model based on our most current forecasts. We discount the related cash flow forecasts using the weighted average cost of capital method at the date of evaluation. Preparation of forecasts and selection of the discount rate for use in the DCF model involve significant judgments, and changes in these estimates could affect the estimated fair value of one or more of our reporting units and could result in a goodwill impairment charge in a future period. We also use market multiples which are obtained from quoted prices of comparable companies to corroborate our DCF model results. The combined estimated fair value of our reporting units from our DCF model often results in a premium over our market capitalization, commonly referred to as a control premium. We believe the implied control premium determined by our impairment analysis is reasonable based upon historic data of premiums paid on actual transactions within our industry.

We review intangible assets that are being amortized for impairment whenever events or changes in circumstance indicate that their carrying amount may not be recoverable. If we are required to record impairment charges in the future, they could materially impact our results of operations.

Contingencies

We define a contingency as an existing condition that involves a degree of uncertainty as to a possible gain or loss that will ultimately be resolved when one or more future events occur or fail to occur. Under U.S. GAAP, we are required to establish reserves for loss contingencies when the loss is probable and we can reasonably estimate its financial impact. We are required to assess the likelihood of material adverse judgments or outcomes, as well as potential ranges or probability of losses. We determine the amount of reserves required, if any, for contingencies after carefully analyzing each individual item. The required reserves may change due to new developments in each issue. We do not recognize gain contingencies until the contingency is resolved and amounts due are probable of collection.

Share-Based Payments

Share-based compensation expense is measured based on the grant date fair value and recognized over the requisite service period for awards that we ultimately expect to vest. For purposes of measuring share-based compensation expense, we consider whether an adjustment to the observable market price is necessary to reflect material nonpublic information that is known to us at the time the award is granted. No adjustments were necessary for the years ended December 31, 2021, 2020, or 2019. We also estimate forfeitures at the time of grant based on our actual experience to date and revise our estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Restricted Share Units

RSUs are service-based awards for which we recognize the associated compensation cost on a straight-line basis over the requisite service period. We estimate the fair value of the awards based on the market price of the underlying share on the date of grant, reduced by the present value of estimated dividends foregone during the vesting period where applicable.

Performance Share Awards

PSAs are performance-based awards for which vesting is dependent on the achievement of certain objectives. Such objectives may be made on a personal, group or company level. We estimate the fair value of the awards based on the market price of the underlying share on the date of grant, reduced by the present value of estimated dividends foregone during the vesting period.

Compensation expense is recognized over the performance period. The number of shares issued on the vesting date will vary depending on the actual performance objectives achieved, which are based on a fixed number of potential outcomes. We make assessments of future performance using subjective estimates, such as long-term plans. As a result, changes in the underlying assumptions could have a material impact on the compensation expense recognized.

The largest plan is the LPP, which has a three-year performance period. As the percent of expected performance increases or decreases, the potential change in expense can go from 0% to 200% of the targeted total expense. The 2019 to 2021 performance period ended on December 31, 2021, the 2018 to 2020 performance period ended on December 31, 2020, and the 2017 to 2019 performance period ended on December 31, 2019. The LPP currently has two open performance periods: 2020 to 2022 and 2021 to 2023. A 10% upward adjustment in our estimated performance achievement percentage for both open performance periods would not have increased our 2021 expense, while a 10% downward adjustment would have decreased our expense by approximately $7.6 million.

Income Taxes

We earn income in numerous countries and this income is subject to the laws of taxing jurisdictions within those countries.

The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies and are based on management’s assumptions and estimates about future operating results and levels of taxable income, and judgments regarding the interpretation of the provisions of current accounting principles.

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. Considerations with respect to the realizability of deferred tax assets include the period of expiration of the deferred tax asset, historical earnings and projected future taxable income by jurisdiction as well as tax liabilities for the tax jurisdiction to which the tax asset relates. Significant management judgment is required in determining the assumptions and estimates related to the amount and timing of future taxable income. Valuation allowances are evaluated periodically and will be subject to change in each future reporting period as a result of changes in various factors.

We assess carryforwards and tax credits for realization as a reduction of future taxable income by using a “more likely than not” determination.

We base the carrying values of liabilities and assets for income taxes currently payable and receivable on management’s interpretation of applicable tax laws and incorporate management’s assumptions and judgments about using tax planning strategies in various taxing jurisdictions. Using different estimates, assumptions, and judgments in accounting for income taxes, especially those that deploy tax planning strategies, may result in materially different carrying values of income tax assets and liabilities and changes in our results of operations.

NEW ACCOUNTING PRONOUNCEMENTS

Note 2 “Summary of Significant Accounting Principles and Practices” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this report contains a summary of our significant accounting policies, including a discussion of recently issued accounting pronouncements and their impact or future potential impact on our financial results, if determinable.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to potential fluctuations in earnings, cash flows, and the fair values of certain of our assets and liabilities due to changes in interest rates and foreign exchange rates. To manage the risk from these exposures, we enter into a variety of derivative instruments. We do not enter into derivatives or financial instruments for trading or speculative purposes.

The following discussion describes our specific exposures and the strategies we use to manage these risks. Refer to Note 2 “Summary of Significant Accounting Principles and Practices” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this report for a discussion of our accounting policies for financial instruments and derivatives.

Foreign Exchange Risk

We are subject to foreign exchange rate risk. Our primary exposures include exchange rates between the U.S. dollar and the euro, the British pound, the Canadian dollar, the Australian dollar, the Indian rupee, and the Japanese yen. We use over-the-counter options and forward contracts to reduce the impact of foreign currency risk to our financial statements.

Additionally, some of our non-U.S. brokerage subsidiaries receive revenue in currencies that differ from their functional currencies. Our U.K. subsidiaries earn a portion of their revenue in U.S. dollars, euro, and Japanese yen, but most of their expenses are incurred in British pounds. At December 31, 2021, we have hedged approximately 45% of our U.K. subsidiaries’ expected exposures to the U.S. dollar, euro, and Japanese yen transactions for the years ending December 31, 2022 and 2023. We generally do not hedge exposures beyond three years.

We also use forward and option contracts to economically hedge foreign exchange risk associated with monetary balance sheet exposures, such as intercompany notes and current assets and liabilities that are denominated in a non-functional currency and are subject to remeasurement.

The potential loss in future earnings from foreign exchange derivative instruments resulting from a hypothetical 10% adverse change in year-end exchange rates would be $48 million and $10 million at December 31, 2022 and 2023, respectively.

The translated value of revenues and expenses from our international brokerage operations are subject to fluctuations in foreign exchange rates. If we were to translate prior year results at current year exchange rates, diluted earnings per share would have a favorable $0.17 impact during the year ended December 31, 2021. Further, adjusted diluted earnings per share, a non-GAAP measure as defined and reconciled under the caption “Review of Consolidated Results — Adjusted Diluted Earnings Per Share,” would have a favorable $0.23 impact during the year ended December 31, 2021 if we were to translate prior year results at current quarter exchange rates.

Interest Rate Risk

Our fiduciary investment income is affected by changes in international and domestic short-term interest rates. We monitor our net exposure to short-term interest rates and, as appropriate, hedge our exposure with various derivative financial instruments. This activity primarily relates to brokerage funds held on behalf of clients in the U.S. and in continental Europe. A hypothetical, instantaneous parallel decrease in the year-end yield curve of 100 BPS would cause a decrease, net of derivative positions, of $64 million to each of 2022 and 2023 pretax income. A corresponding increase in the year-end yield curve of 100 BPS would cause an increase, net of derivative positions, of $64 million to each of 2022 and 2023 pre-tax income.

We have long-term debt outstanding, excluding the current portion, with a fair market value of $9.2 billion and $8.8 billion as of December 31, 2021 and December 31, 2020, respectively. The fair value was greater than the carrying value by $0.9 billion at December 31, 2021, and $1.4 billion greater than the carrying value at December 31, 2020. A hypothetical 1% increase or decrease in interest rates would change the fair value by a decrease of 8% or an increase of 9%, respectively, at December 31, 2021.

We have selected hypothetical changes in foreign currency exchange rates, interest rates, and equity market prices to illustrate the possible impact of these changes; we are not predicting market events.

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Aon plc

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of financial position of Aon plc (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 18, 2022, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Realizability of Deferred Tax Assets

We have served as the Company’s auditor since 1986.

Chicago, Illinois

February 18, 2022

Aon plc

Consolidated Statements of Income

Years Ended December 31

Revenue

Expenses

Amortization and impairment of intangible assets 147 246 392

Interest income 11 6 8

Less: Net income attributable to noncontrolling interests 53 49 41

Net income attributable to Aon shareholders $ 1,255 $ 1,969 $ 1,532

Basic net income per share attributable to Aon shareholders $ 5.59 $ 8.49 $ 6.42

Weighted average ordinary shares outstanding - basic 224.7 231.9 238.6

Weighted average ordinary shares outstanding - diluted 226.1 233.1 240.6

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Comprehensive Income

Years Ended December 31

Less: Net income attributable to noncontrolling interests 53 49 41

Net income attributable to Aon shareholders 1,255 1,969 1,532

Other comprehensive income (loss), net of tax:

Change in fair value of financial instruments 1 13 3

Foreign currency translation adjustments (289) 263 14

Postretirement benefit obligation 277 (101) (141)

Total other comprehensive income (loss) (11) 175 (124)

Comprehensive income attributable to Aon shareholders $ 1,245 $ 2,141 $ 1,408

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Shareholders’ Equity

Shares issued — employee stock compensation plans 2.5 (130) (1) — — (131)

Share-based compensation expense — 317 — — — 317

Dividends to shareholders ($1.72 per share) — — (410) — — (410)

Net change in fair value of financial instruments — — — 3 — 3

Net foreign currency translation adjustments — — — 14 — 14

Net postretirement benefit obligation — — — (141) — (141)

Adoption of new accounting guidance — — (6) — — (6)

Shares issued — employee stock compensation plans 1.9 (154) — — — (154)

Share-based compensation expense — 317 — — — 317

Dividends to shareholders ($1.78 per share) — — (412) — — (412)

Net change in fair value of financial instruments — — — 13 — 13

Net foreign currency translation adjustments — — — 260 3 263

Net postretirement benefit obligation — — — (101) — (101)

Net purchases of shares from noncontrolling interests — (3) — — (6) (9)

Shares issued — employee stock compensation plans 1.7 (129) (1) — — (130)

Share-based compensation expense — 449 — — — 449

Dividends to shareholders ($1.99 per share) — — (447) — — (447)

Net change in fair value of financial instruments — — — 1 — 1

Net foreign currency translation adjustments — — — (288) (1) (289)

Net postretirement benefit obligation — — — 277 — 277

Net purchases of shares from noncontrolling interests — (8) — — (5) (13)

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Financial Position

As of December 31

(millions, except nominal value) 2021 2020

Assets

Current assets

Cash and cash equivalents $ 544 $ 884

Operating lease right-of-use assets 786 911

Other non-current assets 512 610

Liabilities and equity

Liabilities

Current liabilities

Accounts payable and accrued liabilities $ 2,192 $ 2,016

Short-term debt and current portion of long-term debt 1,164 448

Non-current operating lease liabilities 772 897

Deferred tax liabilities 401 262

Pension, other postretirement, and postemployment liabilities 1,375 1,763

Other non-current liabilities 910 895

Equity

Retained earnings (accumulated deficit) (1,694) 1,042

Accumulated other comprehensive loss (3,871) (3,861)

Total Aon shareholders' equity 1,061 3,495

Noncontrolling interests 97 88

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Cash Flows

Years Ended December 31

Cash flows from operating activities

Adjustments to reconcile net income to cash provided by operating activities:

Gain from sales of businesses and investments (142) (25) (13)

Amortization and impairment of intangible assets 147 246 392

Deferred income taxes 11 9 (36)

Change in assets and liabilities:

Accounts payable and accrued liabilities 264 186 (28)

Pension, other postretirement and postemployment liabilities (119) (141) (156)

Other assets and liabilities 4 (80) 5

Cash flows from investing activities

Proceeds from investments 58 64 61

Payments for investments (91) (97) (113)

Net sales (purchases) of short-term investments - non fiduciary 15 (167) 35

Sale of businesses, net of cash and funds held on behalf of clients 218 30 52

Cash provided by (used for) investing activities 49 (679) (229)

Cash flows from financing activities

Issuance of shares for employee benefit plans (130) (149) (131)

Increase in fiduciary liabilities, net of fiduciary receivables 568 316 1,246

Cash dividends to shareholders (447) (412) (410)

Noncontrolling interests and other financing activities (125) (35) (103)

Cash used for financing activities (1,924) (1,772) (247)

Reconciliation of cash and cash equivalents and funds held on behalf of clients:

Supplemental disclosures:

Income taxes paid, net of refunds $ 412 $ 455 $ 353

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

1. Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. The Consolidated Financial Statements include the accounts of Aon plc and all of its controlled subsidiaries (“Aon” or the “Company”). Intercompany accounts and transactions have been eliminated. The Consolidated Financial Statements 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.

References in this report to “Aon,” the “Company,” “we,” “us,” or “our” for time periods prior to April 1, 2020 refer to Aon Global Limited. References in the Financial Statements to “Aon,” the “Company,” “we,” “us,” or “our” for time periods on or after April 1, 2020, refer to Aon plc.

Reclassification

Certain amounts in the prior year's Consolidated Financial Statements have been reclassified to conform to the current year’s presentation. For the years ended December 31, 2020 and December 31, 2019, there was $1 million of income and $1 million of loss, respectively, including the related tax effect, from discontinued operations recognized in Net Income from discontinued operations in the Consolidated Statements of Income and Consolidated Statements of Cash Flows. These amounts are now included in Other income in the Consolidated Statements of Income and Other assets and liabilities in the Consolidated Statements of Cash Flows for the years ended December 31, 2020 and December 31, 2019. There was no impact to the effective tax rate on Net income or earnings per share in either period.

Additionally, for the years ended December 31, 2020 and December 31, 2019, a cash outflow of $127 million and a cash inflow of $3 million, respectively, was classified as an adjustment to Net income from Restructuring reserves in the Consolidated Statements of Cash Flows. These amounts are now included in Other assets and liabilities in the Consolidated Statements of Cash Flows for the years ended December 31, 2020 and December 31, 2019. There was no impact on Cash provided by operating activities.

Disaggregation of Revenue

In 2021, the Company announced steps to further accelerate its Aon United strategy, which now includes four solution lines: Commercial Risk Solutions, Reinsurance Solutions, Health Solutions, and Wealth Solutions. Disaggregation of revenue by the new solution line’s structure is reflected in Note 3 “Revenue from Contracts with Customers”, where prior period amounts have been reclassified to conform to the current periods’ presentation. The changes in the solution line structure affect only the manner in which the Company's revenue results for the Company’s principal service lines were previously reported and have no impact on the Company's previously reported Consolidated Financial Statements, results of operations, or total organic revenue growth. Refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information about the changes in the presentation of our principal service line reporting. The Company continues to operate as one segment that includes all of the Company’s operations, refer to Note 16 “Segment Information” for further information.

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, the disclosures of contingent assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of reserves and expenses. 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. Management believes its estimates to be reasonable given the current facts available. Aon adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, foreign currency exchange rate movements, and the COVID-19 pandemic 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 would, if applicable, be reflected in the Consolidated Financial Statements in future periods.

Revision of Previously Issued Financial Statements

During the fourth quarter of 2021, the Company identified and corrected an immaterial presentation error related to funds held on behalf of clients in the Consolidated Statements of Cash Flows.

Based on an analysis of quantitative and qualitative factors in accordance with SEC Staff Accounting Bulletins 99 “Materiality” and 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, the Company concluded that these errors were immaterial, individually and in the aggregate, to the Consolidated Statements of Cash Flows as presented in the Company’s quarterly and annual financial statements previously filed in the Company’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. There was no impact to the Consolidated Statements of Income, Statements of Comprehensive Income, Statements of Financial Position, or Statements of Shareholders’ Equity for any period presented.

In preparing the Company’s Consolidated Statement of Cash Flows for the year ended December 31, 2021, the Company made appropriate revisions to its Consolidated Statements of Cash Flows for historical periods. Such changes are reflected for the years ended December 31, 2020 and 2019, included in these financial statements, and will also be reflected in the historical periods included in the Company’s subsequent quarterly and annual consolidated financial statements.

The impact to the Consolidated Statements of Cash Flows previously filed in Annual Reports on Form 10-K is as follows (in millions):

As Reported Effect of Change As Revised As Reported Effect of Change As Revised

Cash used for investing activities (679) — (679) (229) — (229)

The impact to the Consolidated Statements of Cash Flows previously filed in unaudited Quarterly Reports on Form 10-Q is as follows (in millions):

2. Summary of Significant Accounting Principles and Practices

Revenue Recognition

The Company generates revenues primarily through commissions, compensation from insurance and reinsurance companies for services provided to them, and fees from customers. Commissions and fees for brokerage services vary depending upon several

factors, which may include the amount of premium, the type of insurance or reinsurance coverage provided, the particular services provided to a client, insurer, or reinsurer, and the capacity in which the Company acts. Compensation from insurance and reinsurance companies includes: (1) fees for consulting and analytics services and (2) fees and commissions for administrative and other services provided to or on behalf of insurers. In Aon’s capacity as an insurance and reinsurance broker, the service promised to the customer is placement of an effective insurance or reinsurance policy, respectively. At the completion of the insurance or reinsurance policy placement process once coverage is effective, the customer has obtained control over the services promised by the Company. Judgment is not typically required when assessing whether the coverage is effective. Fees from clients for advice and consulting services are dependent on the extent and value of the services provided. Payment terms for the Company’s principal service lines are discussed below; the Company believes these terms are consistent with current industry practices. Significant financing components are typically not present in Aon’s arrangements.

The Company has elected to apply practical expedients to not disclose the revenue related to unsatisfied performance obligations if (1) the contract has an original duration of 1 year or less, (2) the Company has recognized revenue for the amount in which it has the right to bill, and (3) the variable consideration is allocated entirely to an unsatisfied performance obligation which is recognized as a seriesof distinct goods or services that form a single performance obligation.

Disaggregation of Revenue

The following is a description of principal service lines from which the Company generates its revenue:

Commercial Risk Solutions includes retail brokerage, specialty solutions, global risk consulting and captives management, and Affinity programs. Revenue primarily includes insurance commissions and fees for services rendered. Revenue is predominantly recognized at a point in time upon the effective date of the underlying policy (or policies), or for a limited number of arrangements, over the term of the arrangement using output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements recognized over time, various output measures, including units transferred and time elapsed, are utilized to provide a faithful depiction of the progress towards completion of the performance obligation. Revenue is recorded net of allowances for estimated policy cancellations, which are determined based on an evaluation of historical and current cancellation data. Commissions and fees for brokerage services may be invoiced near the effective date of the underlying policy or over the term of the arrangement in installments during the policy period.

of participants. Commissions and fees for brokerage services may be invoiced at the effective date of the underlying policy or over the term of the arrangement in installments during the policy period. Payment terms for other services vary but are typically over the contract term in installments.

Wealth Solutions includes retirement consulting and pension administration, as well as investments. Revenue recognized for these arrangements is predominantly recognized over the term of the arrangement using input or output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services, or for certain arrangements, at a point in time upon completion of the services. For consulting arrangements recognized over time, revenue will be recognized based on a measure of progress that depicts the transfer of control of the services to the customer, utilizing an appropriate input or output measure to provide a reasonable assessment of the progress towards completion of the performance obligation including units delivered or time elapsed. Fees paid by customers for consulting services are typically charged on an hourly, project or fixed-fee basis, and revenue for these arrangements is typically recognized based on time incurred, days elapsed, or reports delivered. Revenue from time-and-materials or cost-plus arrangements are recognized as services are performed using input or output measures to provide a reasonable assessment of the progress towards completion of the performance obligation including hours worked, and revenue for these arrangements is typically recognized based on time and materials incurred. Reimbursements received for out-of-pocket expenses are generally recorded as a component of revenue. Payment terms vary but are typically over the contract term in installments.

Share-based Compensation Expense

Share-based payments to employees, including grants of RSUs and PSAs, are measured based on grant date fair value. For purposes of measuring share-based compensation expense, the Company considered whether an adjustment to the observable market price is necessary to reflect material nonpublic information that is known to us at the time the award is granted. No adjustments were necessary for the years ended December 31, 2021, 2020, or 2019. 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 Postretirement Benefits

The Company records net periodic cost relating to its pension and other postretirement 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 as reflected in Other income within the Consolidated Statements of Income. 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.

Earnings per Share

Basic earnings per share is computed by dividing net income available to ordinary shareholders by the weighted-average number of ordinary shares outstanding, including participating securities, which consist of unvested share awards with non-forfeitable rights to dividends. Diluted earnings per share is computed by dividing net income available to ordinary shareholders by the weighted average number of ordinary shares outstanding, which have been adjusted for the dilutive effect of potentially issuable ordinary shares, 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.

Potentially issuable shares are not included in the computation of diluted earnings per share if their inclusion would be antidilutive.

Cash and Cash Equivalents and Short-term Investments

Cash and cash equivalents include cash balances and all highly liquid investments with initial maturities of three months or less. Short-term investments consist of money market funds. The estimated fair value of Cash and cash equivalents and Short-term investments approximates their carrying values.

At December 31, 2021, Cash and cash equivalents and Short-term investments totaled $836 million compared to $1,192 million at December 31, 2020, a decrease of $356 million. Of the total balance, $160 million and $102 million was restricted as to its use at December 31, 2021 and 2020, respectively. Included within Short-term investments as of December 31, 2021 and 2020 balances, respectively, were £84.3 million ($112.8 million at December 31, 2021 exchanges rates) and £44.4 million ($60.2

million at December 31, 2020 exchange rates) of operating funds required to be held by the Company in the U.K. by the FCA, a U.K.-based regulator. During 2021, following discussions with the FCA, and to take into consideration the potential future effects from market volatility due to COVID-19, the Company changed the basis of calculating its liquidity requirement and increased the amount of funds held by £34.3 million ($45.9 million at December 31, 2021 exchange rates).

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 Consolidated Statements of Financial Position.

Funds held on behalf of clients represent fiduciary assets held by Aon for premiums collected from insureds but not yet remitted to insurance companies and claims collected from insurance companies but not yet remitted to insureds of $6.1 billion and $5.7 billion at December 31, 2021 and 2020, respectively. Fiduciary receivables were $8.3 billion and $8.1 billion at December 31, 2021 and 2020, 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 estimate for allowance for credit losses with respect to receivables is based on a combination of factors, including evaluation of forward-looking information, historical write-offs, aging of balances, and other qualitative and quantitative analyses. Receivables, net included an allowance for doubtful accounts of $90 million and $98 million at December 31, 2021 and 2020, respectively.

Fixed Assets

Fixed assets are stated at cost, less accumulated depreciation. Included in this category are certain capitalized costs incurred during the application development stage related to directly obtaining, developing, or enhancing internal use software. 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 Estimated Useful Life

Software Lesser of the life of an associated license, or 4 to 7 years

Furniture, fixtures and equipment 4 to 10 years

Computer equipment 4 to 6 years

Buildings 35 years

Automobiles 6 years

Goodwill and Intangible Assets

Goodwill represents the excess of acquisition cost over the fair value of the net assets acquired in the acquisition of a business. Goodwill is allocated to applicable reporting units. 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. The Company may initially perform a qualitative analysis to determine if it is more likely than not that the goodwill balance is impaired. If a qualitative assessment is not performed or if a determination is made that it is not more likely than not that their value of the reporting unit exceeds its carrying amount, then the Company will perform a quantitative analysis. If the fair value of a reporting unit is determined to be greater than the carrying value of the reporting unit, goodwill is deemed not to be impaired and no further testing is necessary. If the fair value of a reporting unit is less than the carrying value, a goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value limited to the total amount of the goodwill allocated to the reporting unit. Any resulting difference will be a charge to Amortization and impairment of intangible assets in the Consolidated Statements of Income in the period in which the determination is made. Fair value is determined using a combination of present value techniques and market prices of comparable businesses.

We classify our intangible assets acquired as either tradenames, customer-related and contract-based, or technology and other. Amortization basis and estimated useful lives by intangible asset type are generally as follows:

Intangible Asset Description Amortization Basis Estimated Useful Life

Technology and other Straight-line 5 to 7 years

Tradenames Straight-line 1 to 3 years

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 counterparties and are reported accordingly in other assets or other liabilities. Changes in the fair value of derivative instruments are recognized in earnings each period, unless the derivative is designated and qualifies as a cash flow or net investment hedge.

The Company has historically designated the following hedging relationships for certain transactions: (1) a hedge of the change in fair value of a recognized asset or liability or firm commitment (“fair value hedge”), (2) a hedge of the variability in cash flows from a recognized variable-rate asset or liability or forecasted transaction (“cash flow hedge”), and (3) a hedge of the net investment in a foreign operation (“net investment hedge”).

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, and the method for assessing the effectiveness of the hedge. 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 quarterly or more frequently if facts and circumstances require.

For a derivative designated as a fair value hedging instrument, 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 change in fair value of a hedging instrument is recognized in Accumulated Other Comprehensive Income and subsequently reclassified to earnings in the same period the hedged item impacts earnings. For a net investment hedge, the change in fair value of the hedging instrument is recognized in Accumulate Other Comprehensive Income as part of the cumulative translation adjustment.

Changes in the fair value of a derivative that is not designated as part of a hedging relationship (commonly referred to as an “economic hedge”) are recorded in Other income in the Consolidated Statements of Income in the period of change.

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 hedging relationship.

Foreign Currency

Certain of the Company’s non-U.S. 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 in Net foreign currency translation adjustments within the Consolidated Statements of Shareholders’ Equity. Further, gains and losses from the remeasurement of monetary assets and liabilities that are denominated in a non-functional currency of that entity are included in Other income within the Consolidated Statements of Income.

Income Taxes

Deferred income taxes are recognized for the effect of temporary differences between financial reporting and tax basis 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. 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. Tax positions that meet the more likely than not recognition threshold but are not highly certain are initially and subsequently measured based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement with the taxing authority. Only information that is available at the reporting date is considered in the Company’s recognition and measurement analysis, and events or changes in facts and circumstances are accounted for in the period in which the event or change in circumstance occurs.

The Company records penalties and interest related to unrecognized tax benefits in Income taxes in the Company’s Consolidated Statements of Income.

Leases

The Company leases office facilities, equipment, and automobiles under operating and finance leases. The Company’s lease obligations are primarily for the use of office facilities. The Company evaluates if a leasing arrangement exists upon inception of a contract. A contract contains a lease if the contract conveys the right to control the use of identified tangible assets for a period of time in exchange for consideration. Identified property, plant, or equipment may include a physically distinct portion of a larger asset, or a portion of an asset that represents substantially all of the capacity of the asset but is not physically distinct. The Company assesses whether a contract implicitly contains the right to control the use of a tangible asset that is not already owned. In addition, the Company subleases certain real estate properties to third parties, which are classified as operating leases.

The Company’s leases expire at various dates and may contain renewal, expansion or termination options. The exercise of lease renewal and expansion options are typically at the Company’s sole discretion and are only included in the determination of the lease term if the Company is reasonably certain to exercise the option. In addition, the Company’s lease agreements typically do not contain any material residual value guarantees or restrictive covenants.

ROU assets and lease liabilities are based on the present value of the minimum lease payments over the lease term. The Company has elected the practical expedient related to lease and non-lease components, as an accounting policy election for all asset classes, which allows a lessee to not separate non-lease components from lease components and instead account for consideration received in a contract as a single lease component.

The Company made a policy election to not recognize ROU assets and lease liabilities that arise from leases with an initial term of twelve months or less in the Consolidated Statements of Financial Position. However, the Company recognized these lease payments in the Consolidated Statements of Income on a straight-line basis over the lease term and variable lease payments in the period in which the expense was incurred. The Company chose to apply this accounting policy across all classes of underlying assets.

A portion of the Company’s lease agreements include variable lease payments that are not recorded in the initial measurement of the lease liability and ROU asset balances. For real estate arrangements, base rental payments may be escalated according to annual changes in the CPI or other indices. The escalated rental payments based on the estimated CPI at the lease commencement date are included within minimum rental payments; however, changes in CPI are considered variable in nature and are recognized as variable lease costs in the period in which the obligation is incurred. Additionally, real estate lease agreements may include other variable payments related to operating expenses charged by the landlord based on actual expenditures. Information technology equipment agreements may include variable payments based on usage of the equipment. These expenses are also recognized as variable lease costs in the period in which the expense is incurred.

The Company utilizes discount rates to determine the present value of the lease payments based on information available at the commencement date of the lease. As the rate implicit in each lease is not typically readily available, the Company uses an incremental borrowing rate based on factors such as the lease term and the economic environment where the lease exists to determine the appropriate present value of future lease payments. When determining the incremental borrowing rate, the Company considers the rate of interest it would pay on a secured borrowing in an amount equal to the lease payments for the underlying asset under similar terms.

Operating leases are included in Operating lease ROU assets, Other current liabilities, and Non-current operating lease liabilities in the Consolidated Statements of Financial Position. Finance leases are included in Other non-current assets, Other current liabilities, and Other non-current liabilities in the Consolidated Statements of Financial Position.

Principles of Consolidation

The accompanying Consolidated Financial Statements include the accounts of Aon plc and those entities in which the Company has a controlling financial interest. To determine if Aon holds a controlling financial interest in an entity, the Company first evaluates if it is required to apply the VIE model to the entity, otherwise, the entity is evaluated under the voting interest model. Where Aon holds rights that give it the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, combined with a variable interest that gives the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, the Company has a controlling financial interest in that VIE. The Company does not consolidate the VIEs and Aon’s interest in VIEs as of December 31, 2021 was insignificant. Aon holds a controlling financial interest in entities that are not VIEs where it, directly or indirectly, holds more than 50% of the voting rights or where it exercises control through substantive participating rights or as a general partner.

New Accounting Pronouncements

Adoption of New Accounting Standards

Contract Assets and Contract Liabilities Acquired in a Business Combination

In October 2021, FASB issued new accounting guidance related to the accounting for contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency. The new guidance requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with the current accounting standard on revenue from contracts with customers, ASC 606. The new guidance is effective for Aon in the first quarter of 2023, with early adoption permitted. The Company elected to early adopt this guidance in the fourth quarter of 2021. The Company adopted the new guidance on a prospective basis while applying the amendments to all business combinations that occurred during 2021 as required by the new guidance. The early adoption of the new guidance did not have a material impact on the Consolidated Financial Statements.

3. Revenue from Contracts with Customers

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers by principal service line (in millions). Prior year amounts from the Consolidated Financial Statements have been reclassified to conform to the current year’s presentation. Refer to Note 1 “Basis of Presentation” for further information regarding the changes to the Company’s principal service lines.

Years Ended December 31

Consolidated revenue from contracts with customers by geographic area, which is attributed on the basis of where the services are performed, is as follows (in millions):

Years Ended December 31

Europe, Middle East, & Africa other than U.K. and Ireland 2,565 2,236 2,263

Contract Costs

Changes in the net carrying amount of costs to fulfill contracts with customers are as follows (in millions):

Balance at beginning of period $ 339 $ 335

Impairment — —

Foreign currency translation and other (4) 4

Balance at end of period $ 361 $ 339

Changes in the net carrying amount of costs to obtain contracts with customers are as follows (in millions):

Balance at beginning of period $ 184 $ 171

Amortization (48) (47)

AON US Equity

AON · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

AON US Equity☆

AON · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

AON US Equity