Q3 2021 Aon PLC Earnings Call
Good morning, and thank you for holding welcome to an Plc's third quarter 2021 conference call.
At this time all parties will be in a listen only mode until the question and answer portion of today's call.
I would also like to remind all parties that this call is being recorded if anyone has an objection you may disconnect at this time.
It is important to note that some of the comments on today's call may constitute certain statements that are forward looking in nature as defined by the private Securities Reform Act of 1995.
Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated.
Information concerning risk factors that could cause such differences are described in the press release, covering our third quarter 2021 results as well as having been posted on our website.
Now it is my pleasure to turn the call over to Greg case, CEO of Aon plc.
Thank you and good morning, everyone welcome to our third quarter Conference call I'm joined by Christa Davies, our CFO and Eric Anderson, our president.
Previous quarters for your reference we posted a detailed financial presentation on our website.
We wanted to begin by thanking our 50000 colleagues.
2021 continues to be a remarkable year.
And as a result of our colleagues' hard work dedication and perseverance, we delivered outstanding results in Q3 and year to date.
This performance is an extraordinary accomplishment and a direct result of their efforts working together as one firm.
Yesterday the clients.
We're also proud to report that our client feedback continues to be outstanding net promoter scores are at a five year high. Additionally.
Colleague engagement is at the highest levels, we've seen over the past decade.
System with top quartile employers.
Client feedback and colleague engagement are directly reflected in our firm sustained momentum and financial performance.
And deep appreciation for all that our colleagues do for our clients and our firm we were excited to establish in Q3, the Aon United growth ownership plan.
This unique program rewards every colleague from stock based awards to share in the current and future success of our firm and we're thrilled to recognize and support our colleagues and that's why.
Overall as we reflect on Q3 in the first nine months of 2021 our momentum.
By client deliberate colleague engagement and financial results.
Exceptional even more promising is what we see and the opportunity ahead are.
Our conversations with clients reinforced substantial and growing unmet demand to support them in making better decisions to protect and grow their businesses in an increasingly volatile world.
This opportunity to create new markets to serve our clients with the <unk>.
For our innovation agenda, and the sorts of greater momentum in our business.
Focusing on our financial performance in Q3, our global team delivered outstanding results across each of our key financial metrics, including 12% organic revenue growth, notably our strongest growth in over a decade for two quarters in a row driven by mid single digit or greater organic revenue growth from every solution line.
Highlighted by particular strength in health and commercial risks at 16% and 13% respectively.
And adjusted EPS growth of 14%.
Year to date are 9% organic revenue growth reflects mid single digit or greater organic growth from three of our four solution lives or.
Our Aon United strategy is delivering significant momentum and every solution line with net new business generation and ongoing strong retention.
We also saw double digit growth for the second consecutive quarter and the more discretionary portions of our business such as transaction liability human capital and project related work within commercial solutions and health solutions.
We continue to expect mid single digit or greater organic revenue growth and margin expansion in the full year 2021 2022 and over the long term as we continue to win share in our core business and execute to further expand our total addressable market.
As we move forward, we continue to be guided by our Aon United Blueprint to ensure we're operating as a fully integrated global team capable of delivering the best of our firm in every local market today.
Today, we'd like to highlight are the core tenants of a blueprint right momentum and deliver greater future opportunity spin.
Specifically.
Delivering an United is enabling core new business generation and fueling stronger retention.
Business services is building capability for colleagues and translate into better service for clients.
Our ongoing focus on innovation at scale with accelerating development of new solutions to serve unmet demand and our commitment to inclusive people leadership at <unk>.
Resulting in the highest level of engagement and retention and over a decade.
Kurt.
Executing and United with delivering net new business generation and ongoing strong retention by continue engage clients across all of their needs with the entirety of our firm. This strategy has been built over many years that enables extraordinary solutions for clients, resulting in a on winning more growing our book of business with new and existing clients and in turn delivered.
Exceptional results for shareholders.
Second.
We've invested heavily in Aon business services or avs over the past five years, which now represents the core operating platform that spans the entirety of the firms a b S centers of excellence has and will continue to grow margins by driving efficiencies across all solution lines equally important abf's capability enables us to improve.
Client service deliberate and scale innovation globally, much faster driving higher organic growth.
The a b S model is redefining, what we're capable of delivering to clients and improving the way we work.
Third we.
We continue to accelerate innovation at scale.
Delivering innovative solutions to our clients by helping them navigate new forms of volatility build resilient workforces access new forms of capital and address the underserved through digital solutions, all of which substantially grow our total addressable market.
This has been demonstrated for example, intellectual property backed financings a first of its kind of option created and enabled by a M. I T solutions team.
Given the intellectual property represents 80 plus percent of the value of the S&P 500, we believe the entire I P category, but the potential will be 100 billion market over time.
Other categories represent new addressable markets in the tens of billions include cyber climate supply chain and digital client solutions led by our exceptional team I'd probably wall.
Fundamentally this opportunity to serve substantial new addressable markets is driven by client demands it.
At Aon, we relentlessly focus on the voice of the clients more hearing consistent client feedback about the need to make better decisions around long tail risks.
For example, we're currently getting this guidance from the almost 3500 clients that are currently participating in a regional Aon insights series and it's also being reinforced by two pieces of biotech research that we recently released.
Every two years Aon conducts our global risk management survey and the latest report released three days ago was informed by insights for more than 2300 clients across 16 industries spanning public and private organizations from 60 countries around the world.
With more emphasis and reliance on technology cyber risk topped the list is the number one current and predicted future risk globally. It's.
Its highest ranked since the inception of the survey.
Top 10 risks also reflect the impact Covid has had on organizations as they needed to navigate volatility with better and faster decisions.
We're seeing organizations shift focus from event base, the impact based risk assessments, reflecting the shift in mindset.
Following systemic impact of the pandemic.
<unk> also recently released results of a survey focus on 800 C suite leaders and senior executives in the U S. EU U K and Canada to understand how organizations are preparing for and responding to the current environment.
We found that the day senior leaders are more steeply risk aware than ever before but remain confident to take on calculated risks in investments that build resiliency of their companies as we've stated before.
The approach to risk strategy has shifted from being generally defensive and risk averse to more opportunistic taking a holistic integrated view that'd be seek solutions to address these challenges.
There's great respect the need to defend their businesses, but that's accompanied by a desire to find solutions that help them win at the IP financing example, highlights.
This environment, we're uniquely positioned to deliver data driven insights to help our clients make better decisions to grow their businesses.
Fourth and finally, we continue to see tremendous impact of our commitment to inclusive people leadership.
Voluntary attrition is down substantially versus our 2019 baseline and our quarterly pulse of colleagues chose that we continue to enjoy all time high engagement levels.
Many examples.
Our talent focus and priority, including our commitment to you on our apprenticeship programs and a $30 million of investment to create 10000, new roles and new apprenticeship community. Our investment in talent development is about 14000 Aon colleagues around the world have participated in training programs in the last nine months alone.
A man United growth ownership plans.
In summary.
Our global Aon team delivered the best third quarter results in over a decade.
R&D, United Blueprint powered by our capability in Aon business services combined with significant investment in new and growing categories of addressable client demand reinforces the momentum we have today and offer even greater potential over the next few years.
The result is clients that are better informed.
To better advise and equipped to make better decisions now.
Now I'd like to turn the call over to Christa for her thoughts on our financial results and our long term outlook for continued shareholder value creation Christa.
Thanks, So much Greg and good morning, everyone as Greg highlighted we delivered continued progress throughout the quarter and yesterdays.
Through the first nine months of the year, we translated strong organic revenue growth into double digit adjusted operating income and adjusted earnings per share growth building on our momentum as we head into the law schools would be yes.
As I further reflect on our performance year to date as Greg noted organic revenue growth was 12% in the third quarter and 9% Yesterdays, our strongest organic revenue growth in over a decade, we saw strong global macroeconomic conditions and the course that we continues was that three factors as we have since the beginning of the pandemic.
Those factors all the virus in vaccine rollout, including the potential impacts of new variants government stimulus and overall GDP growth.
These macroeconomic conditions do impact our clients in various areas of our business.
Considering the current outlook for these factors we continue to expect mid single digital Grace our organic revenue growth for the full year 2021 2022 and over the long time.
I would also note that total reported revenue was up 13% in Q3, and 12% at yesterdays, including the favorable impact from changes in FX rates driven by a weaker U S dollar versus most currencies.
Moving to operating performance first I wanted to speak to the impact of our previously communicated rehashing the expenses as compared to clear that impacted expense in 'twenty, 'twenty, which I'll describe before any 2021 growth.
As we've described the timing of expenses as changing your Ibs.
$65 million of expense moved into Q3 from Q4.
This impact is due to the actions we took in highlighted in 2020 as we've reduced discretionary expenses to be prepared for the impact of COVID-19 and potential macroeconomic distress.
In Q3, this re patterning negatively impacted margins by approximately 240 basis points.
Belting and Q3 operating margin contraction of 30 basis points. Excluding this impact margins would've expanded by 210 basis points in Q3, and 240 basis points year to date.
Our second key factor impacting adjusted margins as being the relevant speed of revenue growth and investments.
In Q3, excluding the impact of the rate hardening, our strong organic revenue growth significantly outpaced expense growth similar to Q2.
We continue to evaluate investments using our return on invested capital framework in the areas of Palomar Aon business services and innovation to enable long term growth.
We expect that these areas of investment will continue to ramp up significantly during Q4.
In addition, we anticipate continued resumption of G&A and modest increases in real estate of more colleagues returned to the office.
Collectively the headwind from expense rate patenting and tailwind from slower investment as compared to revenue growth. The main factors driving 30 basis points of margin contraction in Q3, and 20 basis points of margin expansion Yesterdays looking.
Looking forward as we said historically, we expect to deliver full year margin expansion for 2021 and over the long time.
Turning back to the results in the quarter, we translated strong adjusted operating income growth into adjusted EPS growth of 14% in Q3 and 16% Yesterdays.
As noted in our earnings materials FX translation was a favorable impact of approximately two cents per share in Q3, I'm 20, full but especially at yesterdays.
If currency to remain stable at today's rates, we would expect an infant they've been impacting Q4.
Excluding the costs associated with the termination of the combination with Willis towers Watson a related cost.
Our performance and outlook for free cash flow in 'twenty, 'twenty, one and going forward remains strong.
Free cash flow decreased 40% year to date to $1 1 billion as strong revenue growth was offset by the $1 billion termination fee payment and other related costs.
The title 136, 3 billion of termination fee and other related costs a pretax amount.
The billion dollar termination fee was paid in Q3 and approximately two thirds of the remaining charges, we paid in 2020 one with the majority of the balance paid in 2022.
We continue to expect to drive free cash flow over the long term building on our long term track record of 14% CAGR over the last 10 years based on operating income growth working capital improvements and reduced structural uses of cash enabled by Aon business services.
As Greg highlighted Aon business services, not only drives efficiencies, but also enables revenue opportunities and innovation at scale.
As an example through our integrated vendor management system in the U S. Last year, we were able to ensure that 5% of addressable vendor spend with diverse suppliers, which is a which is two times higher than the fortune 500 average.
In addition to being a key initiative for Aon as part of our overall ESG strategy. Because there's also a way we can have an even bigger impact on what we deliver for clients in an aon United way.
In the third quarter, we had an opportunity to engage with the biopharmaceutical clients looking to establish a supplier diversity program as part of their broader inclusion and diversity strategy.
Given our demonstrated supply diversity expertise a global spend management team and human capital colleagues came together to forge a new innovative solution based on this class of magic need which included establishing government structure I'm conducting research on peer and industry norms.
Given our outlook for longtime free cash flow growth, we expect share repurchase to continues to remain our highest return on capital opportunity for capital allocation.
In the third quarter, we repurchased approximately 4.4 million shares for approximately $1 3 billion.
We also expect to continue to invest organically and inorganically in innovative content and capabilities to address unmet client needs.
M&A pipeline centered around the four areas that Greg described is focused on bringing innovative solutions to our clients' biggest challenges delivered by the connectivity of anti nausea.
I would also note that all type of first we closed the previously announced sale of our retiree exchange business to our lives.
In 2020, the retiree exchange generated $176 million of revenue I know, there's a predominantly Q4 business.
Turning now to our balance sheet and debt capacity.
We remain confident in the strength of our balance sheet and manage liquidity risk through a well a lot of debt maturity profile.
In Q3, we issued $1 billion of senior notes as we return closer to historical leverage ratios, while maintaining our current investment grade credit ratings.
<unk> expense in the first quarter fourth quarter is expected to be approximately $85 million, reflecting our increased debt levels.
Over the long term, we expect to return to our past practice of growing debt as EBITDA grows further I'd note that fourth quarter is our seasonally strongest quarter for free cash flow generation and we intend to allocate this cash to our highest and best usage based on return on capital, which remains share repurchase.
In summary, strong top and bottom line performance for both the quarter and year to date reflect continued progress and momentum as we entered the law schools or be it.
We believe our disciplined approach to return on invested capital combined with expected longtime free cash flow growth will unlock substantial shareholder value creation over the long term with that I'll turn the call back over the operator, we'd be happy to take your questions.
Thank you very much now we'll begin the question and answer session. If you would like to ask a question. Please press star one please on mute your phone and record your name clearly when prompted your name is required to introduce your questions.
To withdraw that request press star two.
One moment please for the first question.
Our first question now is from Elyse Greenspan with Wells Fargo Ma'am you May ask your question.
Thank you. Good morning. My first question is on the ramp up that you were talking about expenses in the fourth quarter Christa I think he used the word significantly when talking about that just fine.
If you could expand on that ramp up you're expecting from investment candy and real estate.
High end to that should we expect your full year margin expansion can be at or better than your 10 year average, which I believe is around 90 basis points.
Thanks, So much for the question Elyse as you mentioned over the last 10 years, we could live at 890 basis points of margin expansion. So approximately 90 basis points a year for 10 years, and we will deliver full year margin expansion for the full year 2021.
As I mentioned in Q4, we will continue to invest meaningfully in talent in Aon business services and in innovation to enable long term growth and we expect the expenses associated with these investments will ramp up during Q4 terrific opportunity. We see ahead and so as I mentioned at least we expect full year margin.
<unk>, we don't give specific in the guidance just for that but we have delivered margin expansion for the last 10 years of 90 basis points a year.
Okay, and how any other color you can say just in terms of being like where you guys are investing in the third quarter that is significantly was there something going on in the third quarter just in terms of sizing the ramp up it makes it a bit sequentially.
Yeah. So what I did say about Q3 is our strong revenue growth significantly outpaced our expense scribe and so these investments are really going to increase more.
More in Q4 than Q3.
And at least I would just just to reinforce and you think about margin over time of course, the fact that exactly right you think about sort of our historical performance.
It's been what it's been and we fully expect that continues in the future on margin improvement and as we said it in the next year or the following years and over time I would just highlight there there has been.
Continued increase and ability to invest in and grow and build momentum in the business and very specific areas that we believe are really reacting to client need and.
And what they what their sense, you're saying that they've really got to believe to see new solutions off so I do want to reflect that level of increased investment and maybe Eric there are a couple of specific areas you might just want highlight this will at least get a sense on sort of the kinds of things are worried well invested and still maintain margin improvement.
Sure Greg maybe a couple of ways to answer that it makes a comment one is going back to the question or Oh Gee you know we've been doing these client impacts series of events over the last couple of quarters and Theyre drunk thousands of clients right and we've been able to do it virtually.
<unk> allows us to bring global capability global speakers global insight to any region and share best practices around what our clients are thinking about around the world has been really helpful and really one of the benefits of using the technology in a way that we're going to keep using going forward. So the historical model of doing a roadshow, putting people in conference rooms around.
City to city to city by our ability to do it in two hours had talked to 4000 clients at the same time as materials. So that's just one area Christy I just didn't want to lose that point because it has been such a great impact for us in the second Greg as we continue to see real growth opportunities in the business really on a couple of different areas right first time, the data and analytic area.
We are continuing to invest in our digital space, our modeling and analytic capability to help clients see what's coming and understand better you know you mentioned in your opening comments around you know C. Suite people are now risk aware by risk aware that means they want more information right and so we need to have more analytic capability more modeling capability.
So we're investing there and then you've got your traditional areas, where we're seeing great growth rate, whether it's M&A services construction. They don't health benefits those areas, where we really do see that need you know underneath the aon United platform integrating those teams is really is it's sometimes so theres a lot out there how we could talk for days on it but.
Just to make those comments off the question.
Thank you and then one last one on the tax rate was on an adjusted basis was just under 24% this quarter, so a little bit higher than where it's been trending if you can provide any color. There and then any implications that you can share from the global minimum tax.
Yeah. So at least thank you so much for the question, we're not going to give guidance on tax rate going forward, but if we look back historically exclusive of the impact of discrete which can be positive or negative in any one quarter out historical underlying rate of the last four years was 18% and what you saw in Q3, a was it tax rate slightly high I was an unfavorable discrete.
And you know in terms of the global minimum tax obviously, we're tracking this very closely and monitoring et cetera.
Implementation of that has not been worked out yet and as we learn more we look forward to sharing with you later.
Okay. Thank you.
Thank you. Our next question is from Charlie Lederer with Wolfe Research Sir Your line is open.
Hey, good morning, I'm dialing in for Mike Zaremski. This morning, a couple of questions on on the cash flows should we expect the net loss on a GAAP basis.
To reduce help reduce cash tax payments.
Over the next 12 months or so and also you'd noted in the slide deck that the about the 363 million that will be paid in 'twenty one.
Have you disclosed how much of that has been paid to date.
So maybe I'll take those in reverse order Charlie Thanks, So much for the question. So we had 136 3 billion of expenses that were adjusted out of Q3, a $1 billion in termination fee and 363 million of charges, which is the lower end of the range. We provided we provided a $3 $50 million to $400 million.
Range, we paid $1 billion terminations fee in Q3.
And two sides of the 363 million in charges will all be paid by the end of 2021 and the remaining so it'll be paid in 2022.
And then I think your first question was around sort of the did the free cash flow, we do expect to to generate strong free cash flow. This year, and we expect free cash flow over a long time to be growing double digits. One of the things I know Charlie is if you start with the $2 6 billion of free cash flow.
It's straight up the gap a cashless statement in 2020, that's cash flow from operations less capex that equals $2 6 billion and you can grow that double digits trolley and get yourself to a good starting point for 2022 free cash flow are and then I think you're also really asking about the tax deductibility of the billion.
Are we the 1.363 billion are in fact, we we have said that's a pretax number we have not disclosed the details of the tax deductibility of it.
Okay. Thank you and then some of your peers talked this quarter about significant rate increases in cyber insurance.
Is this helping your organic growth and can you talk about what you're seeing there and whether.
There's more of a supply demand imbalance going on now.
Thank you Charlie I'll start with that would love to get Eric Your comments on this.
Yeah.
Overall, when you get into when we're asked about right, we always come back to market and box that's more important than anything else literally you know how clients you know really endure kind of what's going on in the broader marketplace and remember our role in license to help them actually model understand analytics and all the pieces and sort of create the best set of solutions for them in the face of market impact.
And we reflect prices modestly had a modest impact on us over the course of the over the course of the quarter and the first nine months, but generally you know you can pick the one off pieces, but overall, we're looking at how to help clients manage that but Eric on the day to day, how how would you reflect it.
Yeah, Greg I think I would say it and that you know maybe a little bit of what you said to pick up on it you know the clients make decisions based on their risk appetite budget capacity insurance options in the marketplace et cetera, and each product essentially has its own dynamics, but it has its own claim trends and that's turned to conditions retention deductibles supply.
Demand, which markets are competing et cetera. So you know we're coming out of probably a 24 to 36 month price increase environment, but were seeing a deceleration across the globe on the major projects products you mentioned cyber in particular it is important to put that in scale in terms of the size and reach of the.
Entirety of the insurance marketplace. So it gets a lot of attention over the last couple of days I've heard as well, but the reality is it's one product and an entire risk management portfolio of their clients, we're managing against and a lot of the energy that's going into cyber today, he's actually going into the consulting aspects of it the risk management part or the poster that part as oppose.
To just the risk transfer as the market is trying to get its right balance as to what is you know.
What's the right trading price, if you will for risk transfer and what's covered in it in Hawaii based on all the activity, we've seen and ransomware and other things over the last couple of years, but well keep it in context, because overall the size and scale of what our clients are doing around the world, they're trying to make trade offs and choices based on you know market conditions that have been more favorable to <unk>.
Sure worst than clients over the last couple of years, but.
Ultimately our role and that is to help them using our expertise our analytics, our modeling capability to help them make those choices, but you know.
I would just say I would keep cyber in context relative to the entirety of the marketplace.
Great. Thank you guys.
Thank you. Our next question now is from Jimmy Buhler with J P. Morgan Sir you May ask your question.
Hi, Good morning, So first I just had a question on employee retention you've lost a number of high profile of employees during the Willis process. It doesn't seem like it's impacted your results, though so wondering if you could just talk about employee retention overall.
And whether you expect a little bit of a slowdown in the results. Just we just haven't seen that yet, but you might be expecting that over the next few quarters because of it.
Ah kidney mill start with a perspective listen as you heard in my opening quite the reverse in terms of.
What we look at and what we see every day you know obviously I mentioned in my opening comments R. R.
Our voluntary attrition is sort of where we.
Pegged it against 2019, and we're way ahead of that.
Of that baseline so actually we've been we've gotten stronger over time very very positive and then the most important our engagement when we do a poll survey very frequently quarterly and sometimes even monthly around where we are and we literally had the highest engagement. We've had in the last decade and you got to understand where we're looking at you know as we think about our colleagues that are waste.
To help them serve clients, which means it's much more focused on their expertise and their development of their insights and.
And as a client as clients achieve their goals and what they are trying to do our colleagues grow alongside them and that creates a very unique environment and that's what aon.
And as a result, we're much more as I said focus on talent development some of the things I talked about.
In my comments reference that and so we just we feel tremendous momentum with our colleagues around the world and that's borne out in our put walnuts are both our topline performance in our bottom line performance and as I said before in our NPS score net promoter scores. So from our standpoint, you know we are in a very privileged position, we feel terrific about where we.
We are what our what our colleagues were able to deliver around the world and then as it is both.
Eric and Chris and I have all highlighted feel even more optimistic about what the potential holds in terms of where we are but listen you know talent is literally what we do every day, what we're focused on every day.
Eric and Chris isn't put on this as well.
Eric Yeah, Yeah. Thanks, Greg I look I would just say from a from your direct question of are we losing senior people. The answer is you can't track it based on the slippage of the insurance industry rags that print.
We feel as Greg said, we feel great about our team and feel like where we are investing for the future is as critical to how we are positioning our assets. We also have something as you as you think about our Aon business services platform, it's an opportunity for us to provide professional service contracts consistent standards around the world and actually leverage our.
Our innovation in a way that I don't think anyone else in our industry can do.
So as we focus our investment on talent, we're focusing in on where we can grow where we see growth opportunities. We're also focusing to make sure. We've got the depth of service teams as we do that had been building our bench over many years to make sure. We can do that so you don't feel really great about where we are but having that ABS platform is a game changer for us because it actually allows us to see.
Taylor innovation provide the level of service that our clients need and really target our growth.
Our investments in growth and talent in the areas, where we can make an outsized client impact.
Okay.
And then on the timing of expenses. You did mentioned then you had I think mentioned before it is about the expense the shift in expenses towards Tokyo in Turkey.
This year as we think about expenses and margins in 2022 should that be consistent with the 2021 or would it be more consistent with pre pandemic levels.
Great question, So 2020 one is the right patenting of expenses for each go forward Yeah. Jimmy So you should use 2021 is your you'll write tightening.
Okay.
And then just lastly, I think I missed the you obviously benefited from lower G&A spending in the near term and I think at some point that comes back but as you think about your expenses longer term are there sort of long term benefits from the pandemic or whether it's lower real estate footprint or less travel going forward at least for the next few years.
How do you think about sort of how the pandemic affects your margin.
Margin trajectory unexpected.
Thanks, so much for asking the question Jamie It's a great question, we're really focused on letting the best lessons and how we've been serving clients well over the last 18 months, bringing global expertise and teams to serve their most important issues via video globally. It's aric described with all client insights series over 4000 clients.
That's virtually.
And it's creating more opportunities for colleagues to be included globally and we're utilizing this to bring the best talent and best expertise to clients and so for US. It's just really about the future of work and how we how we position Aon AR in a need better scenario, so that seven clients with the best talent and expertise are providing employees with flexibility.
<unk> and ensuring that they are productive and having a diverse and inclusive workforce, but Eric you are right in front of us with clients every day, what would you like him.
Yeah cause there's not much other than to say it has really provided an opportunity for us to unlock our global talent in a way that we can bring it to a client that historically it was just more challenging because of logistics. When a client is if it's a U S based client and they want to talk about something that's happening in France, you just pop up the French team and they can go direct to it and have that call.
First Asia, so historically that would've come from the team in France to the account exec in the U S and would have been talked about in the third person as opposed to just unlock into global team and it does a couple of things for US one it shows the power of the global company to our clients. It also makes connections among our teams in a way where they are.
Alerting firsthand as well and so can repeat that learning so you're absolutely right on everything you said crystal before but it is there's a there's a ability for us to really see and use the global connectivity in a way that historically had just been harder to do it.
And do it on a more frequent basis and we have found over the last 18 months that the clients are really valued that access being able to get right to the point of the expertise and be able to bring it and deliver it in a really no easy way for the clients are digested and really build those relationships as well. So we definitely are going to take those forward, though that has been a real value.
<unk> for us and something that we're going to bake into the model going forward.
Okay. Thank you.
Thank you. Our next question now is from Mayor Shields with K B W. Your line is open Sir.
First Big picture question, if I can what are you telling your clients about.
The persistence of current inflation in the U S.
So overall Myron I, just want to make sure I.
So just what was what were counting our clients about it or was that the question.
Yeah pretty much just because.
I think what you heard that they're going to be tremendously valuable I'm just wondering what.
What do the angle.
Your point is.
Go ahead, Kristen Yeah, I mean, Matt. This is such a great question because wage inflation to suddenly real in a human capital business is hearing directly from clients about it I'm seeing in our compensation surveys and data where compensation increases and compensation is averaging increases in the 12.
2% to 12% range, depending on the role and as a result, our teams are spending a lot of time with clients from strategy to deal with it areas like total rewards that are resource allocation organizational bench, marking a readiness and the development of a longtime talent strategies are really topical right now not surprisingly, we're seeing a lot of demand in our human capital business and it's reflected in.
Double digit growth of that business, we've seen over the course of this year.
Okay that makes sense does it go beyond compensations related to inflation.
Oh, that's the main area, we're seeing it in the labor area are there other areas, you're all thinking about that.
Just like the general people are calling it financial inflation sort of be all items in CPI.
Yeah, I mean, we're suddenly I mean, one of the things we would say more broadly merit inflation is a positive thing for Aon business. Overall, if you think about you know you are you are ensuring asset somewhat of the assets of corporate revenues or employment levels or or.
Commercial property assets, our inflation is generally a tailwind for our business.
Okay, perfect and then if I can follow up.
With regard to the stock ownership plan for colleagues are we going to see any.
Associated stock issuance associated with that would that also be share repurchases.
Well you can just start with the overall.
Overall plant and then Christine could you talk to the mechanics of this I do want to just highlight and this is about this is this was.
It's just been amazing, it's just been a wonderful opportunity for all of our colleagues around the world.
Participate.
Part in the success of the firm, but the mayor of it actually goes well beyond that when you talk about financial wellness and understanding every colleague at Aon hasn't but I wanted your statement now every colleague at Aon actually pass a piece of the firm can watch and see what happens engaged in a discussion around how this works the mechanics of it all the nuances of it it's really.
It's been fantastic and and in essence in many respects, they're getting a chance to see the affirmative way they haven't seen it before so beyond kind of the you know the aspect of it and sort of the the wealth creation aspect of it really isn't the financial wellness aspect of it has been absolutely fantastic.
And then obviously in the context of what we're doing we looked at this this investment and our colleagues I can look at all investments from us from a return standpoint, and we thought this was a phenomenal wanted by the way our high expectations have been exceeded the reaction has just been spectacular.
And then maybe just from a share point of view, we obviously are issuing yeah options as part of this but as we think about you know utilizing our cash you know really around the phone based on return on capital cash on cash returns in our highest return on capital.
Opportunity across Aon remains share repurchase because we value the firm on a just kind of casually basis.
<unk> is up substantially above where we're trading today and therefore, the return on capital to share repurchase continues to be the highest investment opportunity across aon and so where we're investing in share repurchase because of the return not to offset any dilution.
Okay understood. Thank you so much.
Yeah.
Thank you all again to ask a question. Please press star one to join our queue. Our next question now is from Western Bloomer from UBS and Sir Your line is open.
Hi, Good morning. My first question is on the investment in talent and what that could potentially mean for organic growth.
More specifically just in the second half of the year, because it looks like you'll probably come off of a difficult comp in second half 2022 so I'm more curious as you bring on new talent historically, what have you seen in terms of a ramp up in terms of you know getting to full efficiency or where your products expectations there.
But what's the maybe I'll start just broad view and again all three of US can comment on this we stepped back and essentially we've talked about mid single digit or greater organic revenue growth across all of our solution lines and that's where we are and that's where we have achieved and continue to achieve and that's what we're anticipating for next year the year. After in the coming years. So look for that that's the benchmark in turn.
Where we are but we really don't look at it the same way, it's maybe I'll just describe it with this idea of quarter to quarter add a person get a get a return on it we didn't really look at overall, how we support our colleagues and talent strategy of our firm how we both bring them in and develop with them, but also how we develop our current set of colleagues who come in and.
And a part of Aon over time.
That's sort of new hires but it's also I think I think that our apprenticeship program our furniture program as it had been amazing investment and opportunity over the last number of years. You know we started this in 2017 as an example, and in Chicago. We now have 50 employers engage Mr. Friendship network with one thousands of furnaces in Chicago, We made this invest.
Across our across North America, we've copied whats been done across Europe, we've been recognized even fortunate right now and sort of what we've done in terms of sort of the impact. This is going to have it all I'm trying to highlight what's on the topic of talent at Central Bank and we develop it you know in a very specific way I talked about 14000 Aon colleagues in the last nine months alone.
Really going through training programs that help our colleagues continue to evolve that's professionals don't serve clients in an environment, where she becomes more complex that is the way we approach the market.
In all angles, and all aspects with full expectation, we're going to achieve results you know mid single digit or greater so it's not it's not kind of up down or different. It's just that's what it's going to be mid single digit or greater and then we see opportunity to continue to expand with new addressable markets. We talked about so that's philosophically, how we think about it it isn't kind of the ramp up ramp down.
Ramp up ramp down that others, you know often talk about ours is really mid single digit or greater over time.
But Eric thoughts on from your standpoint, do you think about this from a talent.
Yeah, maybe maybe a different angle on it too is that when you think about our aon United model and how we actually interact with clients essentially having a client leader who could bring all of the capability of the firm to a client whether it's on the risk side, whether it's on the wealth side or the outside et cetera that model is a team based model.
So it's less about hiring a person I think getting an immediate return it's really around investing in the capability. So that as we interact with clients, we can bring to them either existing solutions that we have today or as the teams work together and create new solutions, together, where you're matching human capital and risk or reinsurance EM and help too.
Try and create new ways to unlock value that's less about I need five new people to get five new things, it's more around how do you invest consistently over time. So that you have the expertise and you have the team based culture that allows you to deliver that capability to a client in a way that nobody else can and that's what we're after and that's what we've been building on over the long.
Last couple of years, so as Greg said, it's less about head count up head count down just around do you have the right culture do you have the right expertise and the right planning process. So that we're able to interact with our clients in a way where we can deliver something no one else cat that's the play.
Christopher anything you'd add.
Yeah look just to build on Eric's point about investments, we've invested in Aon business services and specialized teams and we've engineered it fun that's capable of sustained long term organic growth and margin expansion.
Any point in the cycle as we've demonstrated over the last decade.
Got it that makes sense and just as a follow up and I may have missed this did you provide a cover wallet growth in the quarter I think it was dealt with you can provide a double digit last question I'm curious how that student.
We didn't provide a specific growth callout I just wanted to highlight that this team has been exceptional. It really is is it really is the perfect example of what Eric and Chris just talked about is looking at opportunities in digital and.
And what we can do to help serve clients more effectively cover wallet in just an amazing amazing for Oh.
We brought them into the family and together they've met our global firm better and hopefully as we've invested in that capability they become stronger over time and so we're seeing substantial impact not just in the what would've been the defined as the core business. They came in with but really holidays helped us grow businesses around the world and we see this is really the tip of the.
The iceberg and what the opportunity could be driven by this team and our broader team around the world.
Great. Thank you for the answers.
Yeah.
Thank you very much I would now like to turn the call back over to Greg case for closing remarks.
Well, thanks very much appreciate it thanks, everyone for joining the call. We are always appreciate it and look forward to our next discussion thanks very much.
Conference has now concluded. Thank you for your participation you May. Please go ahead and disconnect.