Q2 2022 Aon PLC Earnings Call
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Good morning, and thank you for holding welcome to Aon Plc's second quarter 2022 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.
You may disconnect your lines at this time it is important to note that some of the comments in today's call may constitute certain statements that are forward looking in nature as defined by the private Securities 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 infill.
Information concerning risk factors that could cause such differences are described in the press release, covering our second quarter 2022 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 Sir you may begin.
Thank you and good morning, everyone welcome to our second quarter Conference call I'm joined by Christa Davies, our CFO and Eric Anderson, our president as in previous quarters, we posted a detailed financial presentation on our website.
We begin by expressing our deepest appreciation for our colleagues.
Their extraordinary dedication to delivering results for clients, bringing the best of Aon from across geographies and solution lines is inspiring.
Their passion and commitment are reflected and highest ever colleague engagement recorded in our latest full survey.
In the second quarter, our colleagues delivered excellent results demonstrated continued momentum and progress against our key financial metrics organic revenue growth was 8% in Q2 and year to date on top of 11% from prior year quarter, consistent with our ongoing financial guidance of mid single digit or greater organic revenue growth.
This top line strength translated into an adjusted operating margin of 46, 2% in the quarter up 40 basis points from last year, and adjusted EPS growth of 15% demonstrating the strength of our Aon United strategy and half dozen services platform.
Turning to revenue commercial risk delivered 7% organic revenue growth driven by ongoing strong retention and renewals highlighting the strength of our core business and strength from areas of investments might cover wallet within digital client solutions.
In addition, external trends like inflation continue to be an opportunity for us to help ensure clients were covered for increased exposure.
Reinsurance delivered 9% organic revenue growth and our dynamic renewal market. Our team brought the full capability of our firm's data analytics and expertise, resulting in strong retention and net new business generation.
Health solutions delivered 11% organic revenue growth with strong growth in core health and benefits driven by client demand increasing health care costs and continued growth in advisory work related to regulatory changes will be and resilience.
Within human capital solutions demand remains very high to support clients with advice and solutions, especially as they manage ongoing return to work plans are highly competitive talent market wage inflation and employee well being.
Funding wealth solutions delivered 3% organic growth as our team continued to deliver results and core retirement and investment solutions with ongoing additional work help clients address regulatory changes and impact from recent market conditions like the opportunity for pension risk transfer.
Cross well and help external factors are increasing client costs, making up more important than ever for them to efficiently provide optimal benefits for their employees.
Overall, our strong performance in Q2 and year to date reflect.
The strength of our core business across regions intuition lives.
While there is uncertainty around external economic factors some of the trends that challenge the broader economy are positive for our business and create opportunities to help clients.
For the full year, we remain confident in our ability to deliver results in each of our three financial commitments mid single digit or greater organic revenue growth margin improvement and double digit free cash flow growth.
On the topic of innovation.
On many categories of investment we'd like to highlight two areas, where clients are demanding new or better solutions, and we are making meaningful progress in serving them.
Intellectual property and climate.
On IP or you don't.
Actual property solutions team is delivering a first of its kind solution that enables entrepreneurs to find IP rich startup growth businesses without giving up ownership using debt, but its backed by insured IP assets.
Q2 marked an exciting milestone as the team cross the $1 billion threshold and IP back insurance enhance debt financing.
Let me highlight one recent opportunity where our team supported a high growth technology hardware company given.
Given the company's business model and growth stage it had multiple funding avenues available.
The company chose this solution to meet its growth capital needs minimizing equity dilution.
Million dollar transaction allowed the company to secure financing for growth, while insurance markets, we're able to door, sorry risk pools with an innovative application to an intangible asset classes.
Going forward, we're making progress to increase the number of lenders and insurance carriers participated in that solution as we bolt client awareness accelerate distribution and continue to scale this business.
One additional note that's current and evolving economic conditions may compress equity driven valuation.
Back that provides the potential new option for startup growth clients can protect equity ownership and forgo potential down around funding.
They always work on Aon and our work supporting renewable energy investment will start with our progress on our journey to zero carbon.
In March of 2021 we made an industry leading commitment to be net zero by 2030 and alignment with science based targets for scope, one two and three emissions.
We're pleased to report that we made great progress, so far and reduced our 2021 carbon emissions 12%.
Our 2019 baseline as we Decarbonize our supply chain, we're gonna start real estate footprint with smaller greener space and reduce travel and part due to the impacts of COVID-19.
Our recent ESG impact report details our commitment and actions on climate as well as other ESG topics, which are embedded in our overall strategy.
For our clients this comes down to helping them understand and quantify their climate risk.
Prepared to communicate and report on this risk and do something about it by building resiliency, but as it should be at a lower carbon and investing in transition.
Given our track record underwriting new risks developing proprietary valuation models paired with our climate analytics data and partnerships, we're very well positioned all clients quantify current and potential future risks, which we can do to help them mitigate some transfer.
For example, in renewable energy alone onshore and offshore wind investment exceeds 70 billion today and could grow to nearly 400 billion by 2030.
Another rapidly growing addressable market that we serve with meaningful solutions today to ensure the construction and ongoing operation of these facilities.
Similarly in solar.
45 billion of investment the day, you construction manufacturing and technology development and we expect this investment to grow to over 100 billion by 2025.
Recently, our team facilitated a placement for all of the world's largest solar farms required in an united effort across commercial risk and reinsurance to obtain coverage despite challenging market conditions.
As these renewable energy products projects continue to grow in size and scale and complexity the need for expertise and innovation in existing technologies will only increase.
Further innovation in areas like carbon capture and storage hydrogen and other new technologies will require even more innovation to enable the risk financing necessary to make these projects more economically attractive.
Our ability to reduce risks with new solutions helped to bring in new investments and ultimately helps enable continued moves towards decarbonization.
In summary, we delivered a strong quarter, demonstrating continued operating momentum and progress on our key financial metrics, our Aon United strategy and operating model supported by an business services places us in a very strong position to support our clients as they face changing economic conditions in.
In addition, our colleague engagement is very high as our team delivered on our strategy that enables us to achieve results today, both in the core and in priority growth areas. While also investing in innovative new client solutions like intellectual property and climate.
Finally, our strong performance in Q2 and year to date reinforces our commitment to achieving our financial objectives for the year now.
Now I'd like to turn the call over to Christa for her thoughts on our performance and long term outlook for continued shareholder value creation.
Thanks, so much Greg and good morning, everyone.
Greg highlighted we delivered continued progress for both the quarter and year to date.
Possibly yeah, we translated that organic revenue growth into 50 basis points of adjusted margin expansion and double digit adjusted earnings per share.
Look forward to building on this medicine through the rest of 'twenty. So I can say.
As I reflect on our performance through the first half of it.
Greg Nice organic revenue growth was 8%, both Q2 and year to date.
Continue to expect mid single digital Grace of organic revenue growth for full year 2022 and over the long time.
I would also note the reported revenue growth of 3% in Q2, and 4% yesterday includes an unfavorable impact from changes in effects, primarily driven by a stronger U S dollar versus most currencies.
Fiduciary investment income of $7 million in Q2 and $9 million Yesterdays.
So I thought I'd note, we are uniquely well positioned with respect to current economic conditions.
Inflation increases and shared values, which has a positive impact on our business and we've continued to see modest tailwind from insurance pricing, which remains strong.
Rate increases benefit straight fiduciary investment income and reduced pension liabilities.
Broadly as Greg mentioned this volatility makes the solutions and advises me up for around risk and people, even more valuable swap locks.
So it's in areas like workflows, where gilead and pension derisking.
Moving to operating performance, we delivered strong operational improvement through the first half of the year with adjusted operating margins of 32, 7% an increase of 50 basis points driven by organic revenue growth and efficiency, it's not Amazon services platform overcoming expense growth, which includes investment in colleagues.
You can drive long term growth and some ongoing resumption of G&A.
Looking forward, we expect to deliver margin expansion in 2022 and over the long term as we continue our track record of cost discipline and managing investments and long term was on rois seat basis.
As we previously communicated when you think about margins over the course of a full yet.
<unk> continued investment in colleagues and ongoing reduction of G&A throughout the year.
Our Aon business services platform continues to be a key culturally it adds to margin expansion and represents a competitive advantage, especially in a high inflationary markets.
While our Aon business services platform.
Continues to enhance our ability to scale innovation to unlock growth opportunities. It also supports continuous improvement.
We also make day to day processes around the stock.
Instance, our Aon business services and commercial risk teams towards automation opportunity for certificates of insurance, we're now using automation to locate extract and validate the data rather than manually pulling it from emails and attachments.
Over the year this will save on North American chain AC 3000, workouts, representing a 30% reduction in total time spent processing service requests the certificates of insurance before further enhancements.
We're delivering high quality client service and then maybe layout colleagues to spend more time on high value added activities and improving colleague engagement.
This platform enables us to find and capture efficiency opportunities like this around the world.
A key driver of ongoing improvements and margin expansion.
We try and quite a strong adjusted operating income growth into double digit adjusted EPS growth of 15% in Q2 and 14% These days.
As noted in our earnings materials FX translation was an unfavorable impact of approximately 10 cents per share in Q2.
<unk> 29 cents per share yesterday.
Content or am I remain stable at today's rates, we would expect an unfavorable impact of approximately 11 cents per share in the second half or approximately four sets in Q3 and seven cents in Q4 of 2022.
Turning to free cash flow and capital allocation.
Free cash flow decreased 17% year to date.
1060, 3 million, primarily driven by higher receivables as well as higher incentive compensation payments given out strong 2021 financial results as we described in Q1 offset by strong operating income growth.
As we've communicated before free cash flow can be lumpy quarter to quarter and free cash flow generation in the second half of the year is seasonally stronger than the first half we continue to expect to deliver double digit free cash flow for the full year 2022.
Looking forward, we continue to expect to drive free cash flow growth over the long term driven by operating income growth and working capital improvements.
Given our strong outlook for free cash flow growth in 2022 and beyond we expect share repurchase to continue to remain our highest return on capital opportunity for capital allocation.
We believe we are significantly undervalued in the market today.
Lots of by approximately 500 million of share repurchases in the quarter and $1 3 billion Yesterdays.
We can also expect to continue to invest organically and inorganically and content and capabilities to address unmet client need.
M&A plus a lot pipeline continues to be first in our priority areas that will bring scalable solution to our clients growing and evolving challenges.
We will continue to actively manage the portfolio and assessed all capital allocation decisions on an ROI basis.
Now turning 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.
As we've said before we'll continue to watch it as EBITDA grows while maintaining our current investment grade credit ratings thinking.
Thinking about interest rates I'd note that our term debt is all fixed rate with an average interest rate of approximately three 8% and a weighted average maturity of approximately 12 years.
I'd also note that our pension liability improves as interest rates increase and historically, we've taken steps to derisk, the liability and reduce volatility.
In summary, our strong financial results in the quarter and year to date demonstrate continued momentum and progress against our key financial metrics, but we're seeing signs of economic uncertainty we remain confident in the strength of our Sun announced the natural got it so 2022.
Overall, our business is resilient and our Aon United strategy gives us confidence in our ability to deliver results in any economic scenario with that I'll turn the call back over to the up right out and we get the license to take your questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove your question from the queue, but participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the star keys one moment.
While we poll for questions.
Our first question comes from the line of Elyse Greenspan with Wells Fargo. You May proceed with your question.
Hi, Thanks, and good morning.
Last quarter on your conference call you guys had alluded to you know to go into a recession there could be an impact on the discretionary pieces of your business, which I believe is around 20% of your revenue I was just hoping for you guys to expand just upon you know if we do go into recession later, this year or 23, how that could impact.
Revenue and Anne and I'm, assuming like right now given the growth you saw in the quarter Youre not seeing any signs of a slowdown just yet.
At least the maybe I'll start with that and go to Erik and Christa as well, we try to convey last quarter. We'll just reinforce this quarter as we look at the you know the world as it stands and is evolving we're in a very unique place incredibly well positioned and it really shows through in the first quarter showing through in the second quarter, and we expect through the year and into 2023.
Look at growing risks across the board that clients are looking at their current businesses of course for doing risk around supply chain and climate cyber resilience people aspects. All these things are areas, where we have a great opportunity to support clients and that's coming through it really comes through across the board on our core book of business and also our investment part of our business and then.
The underlying pieces that are talked about inflation and interest rates as Christa described of a positive impact on our business and finally Aon business services enables us to react and implement solutions globally, while continuing to operate and invest sufficiently so you're seeing us do what we do improve and drive.
Mid single digit or greater organic growth margin improvement and free cash flow growth to the double digit level. So that's what we are what we want to convey and make sure you understand sort of where we look as we think about the global economy, but hurricane they also get out from a client standpoint.
Sure, Greg I would say look.
At least that's a great question areas of growing risks like climate change geopolitical uncertainty all have a major impact changing regulation on areas like wealth the focus on workforce resilience well being challenging talent market you go on and on health care costs.
All issues that our clients are facing irrespective of broader economic conditions I would also say the aon United model that we've built.
Actually built for moments like this where our teams are integrating together trying to come up with innovative solutions for clients in a way that pulls all the different capabilities of the firm and can deliver it in one unified fashion. So we.
We think the world isn't getting any less risky and so the opportunity is there for us to continue to grow our business.
And I'll just add that many of the underlying drivers of the GDP, It's Greg highlighted possibly impact our business, we've talked about market impact, which is really made up of chicken put us insurance pricing, which provides a modest tailwind to growth and remains strong and inflation, which increases in insured values exposures wages medical call some asset.
All things that positively correlate with our revenue and offset potential pressure on slowing GDP. We've often mentioned the interest rates have a positive impact on our business pretty fiduciary investment income each 100 basis point increase in interest rates with 60 million topline and Bottomline Cross. It also decreases our pension unfunded liability, which decreased cash contribute.
Pensions and finally, our investment in Aon business services continues to drive efficiency and support growth, while helping mitigate inflationary impacts on our own cost base. So we're very confident of these trends and the fact that volatility actually create challenges. The other industries that really creates opportunity for off the clock with Greg and Eric can highlight it.
That's helpful. And then my second question Christa in your prepared remarks, you talked about the slow down and free cash flow to start the year and mentioned my receivables as part of the reason so as you think about the back half of the year or do you think cash flow is going to be strong enough that you'll hit the double digit target.
This year well you know I think by your guidance is still double digit growth for 2022.
We are certainly confident about achieving double digit growth for 2022 life. We absolutely as you described second half cash flow is always stronger than first half cash flow in first half was really impacted by two things higher receivables, which is really due to stronger organic revenue growth I would note by the way DSO was actually flat.
So we're keeping up but we're not accelerating that and we have a plan to celebrate and collect receivables much master and it was also impacted by incentive compensation payments and the very strong 2021 performance, which is exactly what you've been doing and rewarding our colleagues and say, we're very confident about double digit free cash flow growth for the full year 2022 and beyond 2023.
So we've got a very strong free cash flow outlook, and we're really excited about deploying that organically in M&A and then share repurchase which is our highest return on capital opportunity across Aon.
Right and one last quick modeling thing the other income line you did see games, a couple of quarters in a row and some business L shall.
Should we model that going forward I know in the past you've told us interested in kind of zero for that line on an ongoing basis.
We would assume zero for that line on ongoing basis.
And this quarter was off continuing to manage the portfolio as we do we continue and invest in higher revenue growth higher margin higher return on capital opportunities and Mckinsey did a diverse and this is a small divestment.
In lower revenue growth lower margin lower return on capital opportunities and so I would continue to model it going forward.
Okay. Thank you.
Our next question comes from the line of Jimmy Buhler with J P. Morgan you May proceed with your question.
Hi, Good morning, I had a couple of questions first on margins you.
You mentioned you expect to improve margins in 2022, and thereafter, I think seasonally second half should be weaker than the first half, but would you expect to improve margins in the second half as well but.
A potential increase in D&A versus last year, and maybe some inflationary pressures if you're seeing them.
Thank you so much the question we absolutely agree that we are focused and committed to expanding margins for the full year 2022, we don't give margin guidance by quarter. We've certainly seen very strong 50 basis points of margin expansion in the first half of the and we expect to see full year margin expansion driven by organic.
Revenue growth.
Our portfolio of mix shifts to higher revenue growth higher margin areas and our continued productivity benefits through Aon business services, which I mentioned, specifically in our prepared remarks, so again completely committed to full year 2020 to margin expansion.
Okay.
And on fiduciary investment income I think theoretically obviously, it's understandable how it should pick up but rates have been high for a while now and we haven't seen too much of a pick up so I'm just wondering if you could comment on.
The expected lag.
And what the outlook is for fiduciary investment income if interest rates stay at around current levels, maybe a year or two years from now.
Okay.
Yeah. So as I mentioned in my prepared remarks every 100 basis point increase in interest rates and this is the short end of the curve is $60 million topline and bottom line for us I've not been all assets in terms of our investments on behalf of clients or about 55% of the U S and 45% outside the U S.
Our position investment income for Q2 was $9 million and.
So it is increasing as interest rates rise.
Okay. Thank you.
Our next question comes from the line of upon you some with Piper Sandler you May proceed with your question.
Good morning, I wanted to follow up on Lisa's question about them.
[noise] economic sensitivity and maybe you could just kind of remind us or in contrast, with sort of the end of today versus the past recessions. If we look back and why would the business mix be why is it isn't materially different and how should we think about sort of the relative.
Sensitivity today versus not just any sort of magnitude to be very helpful. And then kind of as a follow up as we think further in the M&A does the M&A strategy change in any way because of the.
Recession or desire to them to change the economics Institute.
That's impulse to take both of those two big categories both important.
On the first piece when we talk about mix Eric's point around how we approach our clients are around Aon United is fundamentally.
Different and evolving and getting stronger and stronger we're bringing the full capability of our firm to clients every day and that really does.
And enhance our ability to grow in the core but also bring new solutions and ideas to them and also she wishes ideas, which connect across areas. I mean, we're connecting things in D&O with our with our people business in ways, we haven't done before that fundamentally changes the the risk costs for clients sort of in the world with that piece, that's really cuts across solution lines and what we're trying to convey.
And why we're confident in mid single digit or greater growth across all the environments. Christa described is this capability fundamentally different than.
And then it's ever existed before and we've been working on for quite some time and it's really it.
It really has reinforced and client.
And I hope, we were able to serve clients. So extra exceptional positive which is why as I said before we're confident in mid single digit for the year and overtime, but it really does show up at a client level and there are aspects that are discretionary, but those change overtime and have over time overall the client service leadership capability just continues to strengthen but.
<unk> thoughts and views.
Thanks, So much Greg and Paul what I would add is if you go back to 2008 to 2010 that was really the worst economic environment you could design for a company like Aon a it wasn't a global economic recession without inflation and without interest rates, which is pretty unusual and you're right. During 2008 to 2010 I own.
Organically over those two years I reported revenue grew 6% Tiger over those two years, we expanded margins by 250 basis points and we grew free cash flow very strongly and we would say in this environment. There are three things that make us stronger than that so that's the first is inflation, which has a positive impact on our revenue.
As I described increasing asset values employment levels revenue et cetera. The second is interest rates, which has a positive impact on fiduciary investment income as I mentioned $60 million topline and bottom line for 100 basis point increase in interest rates.
And the third as Greg highlighted as our investments and Eric highlighted is our investments in Aon, United which allows us to bring together capability to serve clients, who in times of volatility and need us more whether that's worthless resilience pension derisking supply chain climate, a number of different areas. So we feel very good about our.
Our ability to navigate through which is why we're reiterating the guidance we have for full year 2022 and beyond mid single digit organic or organic revenue growth margin expansion for the full year and double digit free cash flow guidance.
And so maybe if we could take a minute and then Paul I'll come back to your other question also equally important around M&A, what we're up to and how we're thinking about it but we are seeing are evolving market. It's terrific, but you know maybe it's helpful to start Krista with you on just overall capital allocation, how we're thinking about it because there's really opportunity on the M&A front, but elsewhere and then Eric some examples that we're seeing in some things we've done.
Recently.
Christie you absolutely.
I can say personally Greg.
M&A pipeline is really strong and we are continuing to invest organically and inorganically in areas of great growth and great margin expansion data analytics, the tyche digital with top of wallet a number of other areas across our business, where we're seeing a normal client needs supply chain workforce resilience.
Climate et cetera, and then I would say we continue to operate in a very disciplined way Everest had on capital. So as we generate very strong free cash flow for full year 2022.
Expect our highest and best use of cash will remain share repurchase because we remain undervalued today, we remain undervalued and off peak pricing of $3 50 are and so we continue to invest in share repurchase because it remains the highest return on capital opportunity across Aon and for us to invest in M&A or organically.
Any of these very very attractive opportunities it has to be share repurchase because that's the ball, but Eric do you have the middle of a lot of the great investments in our business, including M&A, maybe you can talk a little bit more about US sure Chris maybe I'll just touch on the <unk> platform that we acquired just as a way to tie some of these pieces together and for those that remember.
It was really about enhancing the capability around capital modeling that we do around reserving and pricing predominantly for the life and non life business on the reinsurance side or but ultimately where we see it going over time is how we extend the platform beyond insurers to corporate clients. Since many of these large corporates with big balance sheets are looking to offer.
They were one of our strategies across insurance captive self insurance et cetera that need better information to be able to do it. So the ability to add that team and that talent to be able to provide that existing impact to our insurance clients from a reinsurance angle, but then use that capability across the broader firm is one of the areas.
Why we were so interested in taking and it's also just worth saying that once you acquire an asset like that getting them involved in the A&D, United buying said, how we actually integrate them to leverage their capabilities across the broader firm has been what we've been working on over the last couple of months and I think just builds confidence in our ability to use that kind of capability.
Across the broader firm.
Yeah.
Well great. Thank you through your hope as always appreciate it.
In the quarter.
Thanks, Paul.
Our next question comes from the line of David <unk> with Evercore ISI. You May proceed with your question.
Hi, good morning.
Crystal last quarter, you made some commentary around the discretionary parts of your business I was just wondering if you can talk about what you're seeing in terms of leading indicators of demand on those discretionary businesses specifically in the second quarter.
Sure.
What you're saying David is very strong growth across our business I expect growth in the quarter, 8% growth year to date, and we're reiterating guidance of mid single digit or greater organic revenue growth for the full year exactly the outlook. We started the year with five like continuously strong areas of demand from clients in the <unk>.
Core and isn't the discretionary or it's really David because in times of volatility a lot of the services, we're offering clients are in greater demand.
So whether that supply chain volatility, whether that's market volatility, which is creating a change the pension de risking our pension buyout lions well, that's what's supposed to resilience what that supply chain. There are so many areas of increased demand from clients in times of disruption.
Got it okay. That's that's helpful and.
Greg last question I had asked a question or last quarter I'd ask the question around just new head count and you spoke more about focusing on productivity and.
I think on this call Crystal you made some interesting comments on just how Aon business services is helping enhance productivity. So I'm wondering if you could just help me think about it.
Are there any metrics you look at internally just on producer productivity and maybe you can just share how much those have increased over the last several years and sort of the outlook going forward not just on producer productivity.
Well David Thanks, we loved the question around talent. It is it's the heart of our firm everything we do comes back for our colleagues as they support our clients and we continue to invest very substantially in attracting and retaining talent.
It's been it's been a strategy for forever at Aon and continues to be but.
But as Christa described in her described we are investing in capability to do that more effectively. So yes last time, we talked about productivity productivity for us is helping our colleagues do more with clients. They love it when they consider go off the table and Wawa client on new ideas.
A tremendous outcome and we were developing content and capability that makes it easier and easier for them to do that so yes, not just bringing talent in but making talent better not just bigger but better.
And it really is at an individual level working to do that it's why as I described in Q2, we recorded the highest ever engagement we've ever had from our poll survey. So you'll see that from the standpoint of sort of how colleagues are reacting to that.
And you know our voluntary attrition for example, as you know way back in line with where it was pre pandemic. So all things are coming together very very positively and continue to reinforce each other from an overall talent perspective and we.
It will take energy and efforts to sort of make investments, where we need to to support support our business and to support our client leadership, Eric you were leaving us everyday and I sent a talent level is so fundamental what would what do you see.
Thanks, Greg that's a great question and one that is really important to us and we spend a lot of time on and we have been making investments which are really excited I would say they come in like three buckets. The first is we're investing in client leadership, especially people who have industry focus with deep understanding of client specific challenges. We're also investing organically in some of the areas we've been talking.
And about like climate cyber IP.
Fix all the areas, where we think we can add real value to clients in need expertise to be able to provide that value and then the third and we talked a little about it we're taking but cover while at the same through M&A, where bringing in expertise not only from a people perspective, but a technology perspective as well.
Critical to I think Greg just picking up on your last point, making sure that we embed that talent in the firm so that the broader firm can use it and leverage it with their clients using that aon United model to get that talent across all types of clients around the world is critical but.
Really focused on making sure we've got the best talent in the industry and I think we're making great progress.
And there are two great. Examples as you sort of go back in time, we're talking now covered wallet entitled but if you go back in time and investments. We made in cyber has been phenomenal work on the acquisition M&A front has put us in an unbelievable position to serve clients today in a category also go back to 600 Onewest, we haven't talked about on these calls for quite some time a few years ago now we are involved with.
What was.
Truly world class capability into 200 colleagues working on.
Intellectual property and we put the example out today on what a after a number of years sort of what we're seeing you know a $1 billion now across the threshold on IP that so these are all the things that we think are fundamental David that come to us to come into this and we track it carefully as you might expect and we're seeing results in progression.
I do want to just touch on the other the service isn't good Kristen I'll highlight that again too because that also is an area that helps us scale capability that reinforces talents that Christine was talking about EBITDA P. B S for a minute.
Yeah look a really important part of our pilot strategy is aimed at the Senate.
As you've heard us say before it's not just driving efficiency, but enabling us to increase squats and scale innovation MX Foster and sort of Pavan doesn't services enable us to drive efficiency in our cooperations, which helps offset the trends, we see around wage inflation, enabling us to continue to invest in talent and people, which drives the long term.
Margin expansion. So we're really excited about higher iron business that helps us accelerate aon United.
Okay, Great. That's all I really appreciate the comprehensive answer thanks, so much.
Our next question comes from the line of Mayor Shields with K B W. You May proceed with your question.
Ah Thanks, Sunny side I guess, the semantic game right now I don't mean, you I mean politically we've gone through two quarters of contracting real GDP growth can you talk about how that impacted your first half results relative to expectations.
Mark.
Okay.
Yeah. So look my I would start with we've seen really strong.
8% in Q1, 8% in Q2, 8% year to date and we continue to reiterate got it for the whole year exactly as we did at the beginning of the year mid single digital great breakout organic revenue growth margin expansion for the full year and double digit free cash flow.
So we're seeing opportunities, whether its installation, which positively impacts our revenue in.
Driving up asset values, driving unemployment levels driving up corporate revenues.
Whether it's interest rates, which obviously positively impactful from a revenue five times, a particular investment income.
Whether it's volatility and clients meeting us more on the supply chain workforce resilience pension derisking in times of increased volatility, but Greg what would you say.
Well I think you captured it well, but we're just trying to reinforce in every way we can.
Mid to single digit or greater in terms of some of the performance for the year and ongoing for lots of different ways and perspectives that we've been able to we've been able to accomplish that.
You've just seen if you've seen the performance you've seen by the way we think about growth. It's not just top line growth. It's also.
Operating income growth and free cash flow growth as Christa described before.
Okay No that's helpful.
Second maybe more detailed question as we've been talking a little bit about cover wallet. That's something you can just update us on how consumer or I should say customer willingness to use technologies like cover wallet, how is that evolving over time.
Thanks, Eric.
Uh huh.
Sure Greg well, it's a great question and something we're really excited about as a platform and there's two ways you use it you use of direct to consumer which continues to be sort of the base of will cover wallet was when we acquired it and that continues to grow but where were actually seeing great opportunity is how we bring cover wallet to our existing clients that have large distribution is.
She was on their own whether it's rideshare companies or dealerships or what have you where they need to provide product to a broad number of people think of it from a b to b to C perspective versus a direct to consumer.
So when you look at our enterprise client strategy and our ability to get to those large clients with this capability as they were trying to provide value either to their own colleagues or to their business partners. It does give us a platform that we think drives great growth for us and rounds out the relationships that we have with these clients in a way, we're providing real value. So.
We bought it as a D to C and we've been able to expand it into the B to B to C Arena and are having some good success with it.
And when you think about it this is really about not even really introducing technology, you're sitting across the table from a client again, if they've got as Eric described gig workers around the world and so if you're saying Hey, we think we can actually help you provide service to them with a really clean pipe interface that does things that help them manage their business on your behalf.
We could do globally, that's just not something that anyone can say.
Behind the scenes technology is massive and behind the scenes technology and IP intellectual property is also a massive but you're not having that conversation and the conversation is our is our colleagues essentially asking someone who's got a growth business, Hey would you like to actually raise growth capital in a way that doesn't dilute your equity ownership until the technology the content is.
All behind that and reinforces that until the introduction of technology to the clients is really through helping them win in their business and that's where we found great receptivity.
Okay. That's very helpful. Thank you so much.
Our next question comes from the line of Rob Cox with Goldman Sachs. You May proceed with your question.
Hey, Thanks for taking my question I was hoping to get a little more color on what's driving the strong growth in health solutions broadly and if you could quantify how meaningful the benefit from the timing of revenues and of course, the core health and benefits brokerage business in the quarter.
Excellent Margaret's question, Robyn, we love this category as we've talked about before so much going on around the global World withheld and it really does cut across regions beyond just a specific area of it Eric.
Thoughts on the progression and health.
Sure I mean, I think when you look at the long term outlook outlook, certainly, helping our clients mitigate health care costs, and improving employee health and wellbeing is a great business at the moment and I think we're really confident in the growth has come from all geographies and it's driven by retention renewals project work across a broad broad segment.
That area, but also great growth related to the wellbeing and employee resilience part of health.
The human capital piece with the data solutions growth advisory work really broad based in terms of its impact, we're having with clients across all of our geographies.
Got it and then on the the timing benefit on.
Revenues in the quarter is there any way to quantify that.
Yeah. So what I would say is we haven't disclosed it but what we have said is it's coming from Q3 into Q2.
So it's you know, it's not material well, but you should see some smaller amount in Q3 than you would otherwise expect.
Okay got it and then just lastly, I was just hoping to ask a question on <unk> ability to negotiate tire pricing in some of the fee based businesses in light of inflation and if if you've seen any greater success in doing so and certain fee based businesses.
<unk> versus others.
Well the conversation we have with our clients Ah Boy this is about value.
Value, we provide for them, how we don't teams to support them and create and then having to establish that they have to understand the value appreciate the value and then.
And then when you talk about what's fair in the context of sort of how we are compensated for that so that's been something we always do ours is about higher value, we want to bring more incremental value to clients.
Than anyone else and more over time and in doing so we have been we've been rewarded for that.
As it relates to value for clients and so we continue to do that and we're having.
Progression. This year, just like we have last year and the years before.
Thank you.
Our last question comes from the line of Weston Bloomer with UBS. You May proceed with your question.
Hi, Good morning, one follow up question on organic growth within reinsurance you highlighted strong growth in both treaty and facultative and the quarter Swift the facultative piece understanding it's more transactional in nature and second half weighted just curious on your outlook for facultative placements in the second half of the year any tailwind is worth pointing out or is it.
Faculty of growing faster or slower than treaty currently.
Facultative has been a great business for us over many years and if you put it in the context of the overall market, where many of the insurers continue to remediate their portfolios and they often do that through the use of facultative placements in order to maintain their direct client relationship. So fact for us around the world continues to be a great fit.
So we had pretty value with it and we expect that that would continue as we go forward.
Great. Thank you.
Yeah.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr. Greg case for closing remarks.
Thanks, very much and just wanted to say to everybody I. Appreciate you being part of the call and look forward to our discussion next quarter.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation enjoy the rest of your day.
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