Q4 2023 Aon PLC Earnings Call

Greg: for more talk. Together, this creates a significant opportunity to work with clients to design and optimize their programs, including core offerings to improve colleague health, how operations drive workers' compensation costs, choosing optimal partners in their health model, and supporting top talent through a strong employee value proposition, to ultimately maximize return on investment of their people. All these are examples of our 3x3 plan in action.

Together this creates significant opportunity to work with clients to design and optimize their programs, including core offerings to improve colleague health.

Our operations drive workers' compensation costs.

As an optimal partners in their health model and supporting top talent, who have strong employee value proposition to ultimately maximize return on investment of their people spend.

All of these are examples of our three by three planning action, it's human capital and risk capital delivered through our Aon client leadership model and enabled by Aon business services East three pillars reinforce and accelerate our Aon United strategy, which has driven our financial performance and gives us great confidence in our outlook.

Speaker: It's human capital and risk capital delivered through our AON client leadership model and enabled by AON Business Services. These three pillars reinforce and accelerate our AON United strategy, which has driven financial performance and gives us great confidence in our outlook. We delivered strong results in the quarter that contribute to four-year progress against our key financial metrics. Organic revenue growth of 7% in the quarter and 7% for the full year was highlighted by double-digit growth for the full year in reinsurance solutions and health. And we've maintained strong overall growth throughout the year on top of 6% organic growth in the prior year. In the fourth quarter, commercial risk grew 4% organically, with strength in property, and casualty in construction, even against the headwind communicated in prior quarters of ongoing pressure from trends in the M&A and IPO market.

On financial.

Performance, we delivered strong results in the quarter, but contribute to full year progress against our key financial metrics.

Organic revenue growth of 7% in the quarter and 7% for the full year was highlighted by full year double digit growth in reinsurance solutions and health solutions and.

And we've maintained strong overall growth throughout the year on top of 6% organic in the prior year.

In the fourth quarter commercial risk grew 4% organically with strength in property casualty and construction even against the headwind communicated in prior quarters with ongoing pressure from trends in the M&A and IPO markets.

Speaker: Wealth Solutions' organic growth of 5% in Q4 reflects strong growth in retirement, which includes growth from ongoing pension risk transfer projects and work to help clients address changing regulatory requirements. Reinsurance Solutions organic growth was 14%, contributing to full year organic growth of 10% With our team, we close the year strong, while also helping clients prepare for and execute an Early 1-1 Renewal. Health Solutions delivered 11% organic growth, reflecting strength around the world in the core, driven by net new business and retention, as well as strong growth in the U.S. consumer benefit solution.

Wealth solutions organic growth of 5% in Q4 reflects strong growth in retirement, which includes growth from ongoing pension risk transfer projects and work to help clients address changing regulatory requirements.

Reinsurance solutions organic growth was 14% contributing to full year organic growth of 10%.

As our team closed the year strong while also helping clients prepare for and execute an early one one renewal.

Health solutions delivered 11% organic growth, reflecting strength around the world in the core driven by net new business and retention as well as strong growth in the U S consumer benefit solutions.

Speaker: This performance gives us confidence in our ability to drive ongoing growth across the portfolio, fully reflecting the strengths of AON United. For the full year, 7% organic growth and ongoing operational improvement contributed to 80 basis points of adjusted operating margin expansion and 10% adjusted operating income growth. These strong results demonstrate our progress and momentum, as well as the power of our AON United strategy and AON Business Services platform. This performance builds on our long-term track record of success. Over the past 12 years, we've strengthened and accelerated organic revenue growth to mid-single digits or greater.

This performance gives us confidence in our ability to drive ongoing growth across the portfolio fully reflecting the strength of Aon United.

For the full year, 7% organic growth and ongoing operational improvement contributed to 80 basis points of adjusted operating margin expansion and 10% adjusted operating income growth.

Strong results demonstrate our progress and momentum as well as the power of our Andy United strategy on AI.

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This performance builds on our long term track record of results over.

Over the past 12 years, we've strengthened and accelerated organic revenue growth mid single digits or greater.

Greg: Delivered over 1,200 basis points for adjusted operating margin expansion and grown EPS and free cash flow at a 11% compounded annual rate, ending 2023 with nearly $3.2 billion in free cash. The steps we've taken to accelerate AON United with our 3x3 plan reinforce and strengthen our long-term financial guidance for the firm, including mid-single-digit or greater organic revenue growth in 2024 and over the long term, adjusted operating margin expansion As we've communicated, initiatives like our restructuring program and expected acquisition of NFP will impact this guidance in the near term, and over time, we believe these initiatives will contribute to significant ongoing shareholder value. More importantly, we view the opportunity as greater over the next five years than at any time in our history.

<unk> delivered over 400 basis points of adjusted operating margin expansion and growing EPS and free cash flow at 11% compounded annual rate ending 2023 with nearly $3 2 billion in free cash flow.

The steps, we've taken to accelerate Aon, United with our three by three plant reinforce and strengthen our long term financial guidance for the firm.

Including mid single digit or greater organic revenue growth in 2024 and over the long term.

Adjusted operating margin expansion over the long term and long term double digit free cash flow growth.

As we've communicated initiatives like our restructuring program and expected acquisition of MFP impact this guidance in the near term and over time. We believe these initiatives will contribute to significant ongoing shareholder value creation.

More important.

We view the opportunity is higher over the next five years than at anytime in our history.

Christa: And in closing, we're pleased to report another strong year of progress against our AON United strategy, which we're accelerating with our 3x3 plan to deliver risk capital and human capital at scale, fully reinforced through AON Business Services. Looking back on the year, we delivered accelerating growth across three or four solution lines and built momentum across the firm, including 7% full-year organic revenue growth, 80 basis points for adjusted operating margin expansion, 10% adjusted operating income growth, and nearly $3.2 billion of free cash. Importantly, we took a series of major actions to position AON for stronger performance in 2024 and over the coming year. Now, I'd like to turn the call over to Christa for her thoughts on our financial results and long-term outlook. Christa?

And in closing we're pleased to report another strong year of progress against our annualized strategy, which we're accelerating with our three by three plan deliver risk capital and human capital at scale fully reinforce three out of business services.

Looking back on the year, we delivered accelerating growth across three or four solution lines and built momentum across the firm.

Including 7% full year organic revenue growth 80 basis points of adjusted adjusted operating margin expansion, 10% adjusted operating income growth of nearly $3 2 billion of free cash flow.

Equally important we took a series of major actions to position <unk> for stronger performance in 2024 and over the coming years.

Now I'd like to turn the call over to Christopher our thoughts on our financial results and long term outlook.

Thanks, So much Greg and good morning, everyone as Greg highlighted we delivered strong operating results from the fourth quarter to finish the year strong.

Christa: Thanks so much, Greg, and good morning everyone. As Greg highlighted, we delivered strong operating results in the fourth quarter to finish the year strong. In the quarter, we translated 7% organic revenue growth into 60 basis points of adjusted operating margin expansion and 10% adjusted operating income growth. By the year 2023, we should deliver 7% organic revenue growth, 80 basis points of margin expansion, 6% EPS growth, and generate $3.2 billion of free cash flow. In the quarter, we announced our definitive agreement to acquire leading broker NFP, enabling us to unlock the fast growing mid markets with Aon Business Services-enabled enhanced distribution and further accelerate our Aon United strategy.

In the quarter, we translated 7% organic revenue growth and 60 basis points of adjusted operating margin expansion and 10% adjusted operating income growth.

The full year 2023, we delivered 7% organic revenue growth.

80 basis points of margin expansion, 6% EPS growth and generated $3 2 billion of free cash flow.

In the quarter, we announced our definitive agreement to acquire leading broker NSP.

Enabling us to unlock the fast growing mid market with Aon business services enabled enhanced distribution and further accelerate our aon United strategy.

The steps that we've taken around Amazon services now enable us to address this attractive market and a compelling way that delivers risk capital and human capital at scale to clients of all sizes.

Christa: The steps that we've taken around AMBUS and services now enable us to address this attractive market in a compelling way that delivers risk capital and human capital at scale to clients of all sizes. The expected acquisition of NFP builds on our long-term, proven track record of strategically allocating capital at scale to high-return opportunities to create long-term value for clients, colleagues, and shareholders. And, as Greg mentioned, we see the expected acquisition and our restructuring program reinforcing our AON United strategy and our 3x3 plan. We are extremely well positioned to build on this momentum as we head into 2024. As I reflect on our results, as Greg noted, organic revenue growth was 7% in Q4 and for the full year, highlighted by double-digit organic revenue growth in reinsurance solutions and health solutions.

The expected acquisition of NFC built on a long term proven track record of strategically allocating capital upscale to high return opportunities create long term value for clients colleagues and shareholders.

And as Greg mentioned, we see the expected acquisition and our restructuring program reinforcing our Aon United strategy allow three by three plan.

We are extremely well positioned to build on this momentum as we head into 2024.

As I reflect on our results as Greg noted organic revenue growth was 7% and peaceful and for the full year highlighted by double digit organic revenue growth in reinsurance solutions and health solutions.

Christa: I would note that reported revenue growth of 8% in Q4 includes a favourable impact from changes in FX of 2%, and there's no net impact from changes in FX to full-year reported revenue. I'd also highlight fiduciary investment income, which is not included in organic revenue growth, with $78 million in Q4 and $274 million for the full year. If you were to include fiduciary investment income, organic revenue growth would have been 8% in both Q4 and the full year.

Speaker Change: I would note that reported revenue growth of 8% in Q4 includes a favorable impact from changes in FX of 2% and there is no net impact from changes in FX to full year reported revenue.

Speaker Change: I'd also highlight fiduciary investment income, which is not included in organic revenue growth was $78 million in Q4 and $274 million for the full year.

So it includes fiduciary investment income organic revenue growth would have been 8% in both Q4 and the full year.

Speaker Change: We continue to expect mid single digit or greater organic revenue growth for the full year 2024 and over the long term.

Christa: We continue to expect mid, single-digit, digital, greater organic revenue growth for the full year 2024 and over the long term. Moving to operating performance. We delivered strong operational improvement in Q4, with adjusted operating margins of 33.8%, an increase of 60 basis points, driven by revenue growth, efficiencies for managers, and services. Overcoming expense growth, including investment in colleagues and technology to drive long-term growth. For the full year, adjusted operating margins of 31.6% reflect margin expansion of 80 basis points. As previously communicated, there was no impact on margin from restructuring savings.

Speaker Change: Moving to operating performance, we delivered strong operational improvement in Q4 with adjusted operating margins of 33, 8% an increase of 60 basis points driven by revenue growth efficiencies from Amazon services, overcoming expense growth, including investment in colleagues and technology.

Speaker Change: To drive long term growth.

Speaker Change: For the full year adjusted operating margins of 31, 6%, reflecting margin expansion of 80 basis points as previously communicated there was no impact on margin from restructuring savings.

Christa: Looking forward, we expect to deliver margin expansion in 2024 and over the long term, as we continue our track record of cost discipline and manage investments in long-term growth on an ROIC basis. We expect restructuring savings to fall to the bottom line and contribute to full-year adjusted operating margin expansion. Restructuring actions completed in 2023 are expected to generate $70 million of run rate savings in 2024.

Speaker Change: Looking forward, we expect to deliver margin expansion in 2024 and over the long term as we continue our track record of cost discipline and managing investments in long term growth on an ROIC basis.

We expect restructuring savings will fall to the bottom line and contributed to full year adjusted operating margin expansion.

Speaker Change: Restructuring actions completed in 2023 are expected to generate $70 million of run rate savings in 2024.

Christa: At this time, we continue to expect 100 million of run rate savings in 2024, as we continue to execute against our plans for AON Business Services and our business. As we've previously communicated, we've conservatively modeled the expected acquisition of NFP to close mid-year 2025. While the combined adjusted operating margin will initially be lower than AON's standalone, we expect, over time, to continue to improve AON's overall margins through operational improvement and the impacts from previously communicated cost synergies. Turning to EPS, Adjusted EPS was flat in Q4.

At this time, we continue to expect $100 million of run rate savings in 2024, as we continue to execute against our plans for Amazon services and our business.

Speaker Change: As we've previously communicated we are conservative models, the expected acquisition of NSP to close midyear 2025.

Speaker Change: While the combined adjusted operating margin will initially be lower than IL sand alone. We expect over time to continue to improve <unk> overall margins through operational improvement and the impact from previously communicated cost synergies.

Speaker Change: Turning to EPS adjusted EPS was flat in Q4.

Christa: Operating income grew 10% but was offset by a headwind from a higher tax rate in the quarter and non-operating expense. For the full year, Organic Revenue Growth and Margin Expansion translated into adjusted EPS growth of 6%, overcoming a headwind from non-operating expense. I'd note the change in other non-operating expense had a 15 cents per share, or 4%, unfavorable impact in Q4, and a 98 cents per share, or 7%, unfavorable impact for the full year. This reflects an unfavorable impact from balance sheet FX remeasurement in the current period, an increase in non-cash net periodic pension expense, as well as Also, as noted in our earnings materials, FX Translation had a favourable impact of approximately 3 cents per share in Q4 and an unfavourable impact of 17 cents per share for the full year.

Speaker Change: Operating income grew 10%, but was offset by a headwind from a high tax rate in the quarter and nonoperating expense.

Speaker Change: For the full year organic revenue growth and margin expansion translated into adjusted EPS growth of 6% overcoming a headwind from nonoperating expense.

Speaker Change: I would note the change in other nonoperating expense, how to 15 cents per share or 4% unfavorable impact in Q4.

Speaker Change: And the 98 per share or 7% unfavorable impact for the full year.

Speaker Change: It reflects an unfavorable impact from balance sheet FX remeasurement in the current period.

Speaker Change: An increase in noncash net periodic pension expense as well as a gain on sale of businesses in the prior year period.

Speaker Change: Also as noted in our earnings materials FX translation had a favorable impact of approximately three cents per share in Q4, and an unfavorable impact of 17 push after the food it.

Speaker Change: If currency to remain stable at today's rates, we would expect no material net translation impact to results for the full year 2020 school.

Christa: If the currency remains stable at today's rates, we would expect no material net translation impact for the full year 2024. Additionally, in 2024, we expect non-cash pension expense in OIE to be $43 million, spread evenly across quarters, compared to $71 million in 2023. And, as we've previously communicated, based on a mid-2025 close, the expected acquisition of NFP is expected to be dilutive in 2025, break even to adjust to 2026 EPS, and accretive in 2027 and beyond. At this time, there are no further updates on the regulatory process or deal timeline for NFP.

Speaker Change: Additionally, in 2024, we expect non cash pension expense in Hawaii to be $43 million spread evenly across quarters compared to $71 million in 2023.

And as we've previously communicated based on a mid 2025 close the expected acquisition of NXP is expected to be dilutive in 2025 breakeven to adjusted 2026, Aps and accretive in 2027 and beyond.

Speaker Change: At this time there are no further updates on the regulatory process all deal timelines for NXP.

Christa: Turning to free cash flow, we generated $3.2 billion of free cash flow in 2023. For the full year, cash from operations increased $216 million year-over-year, or 7%, reflecting double-digit operating income growth and overall working capital optimization, partially offset by higher cash tax payments. I'd note the negative impact to working capital caused by temporary inversing delays associated with the new system implementation, which we communicated last quarter, persisted in Q4 and impacted our overall continued progress on working capital. Free cash flow increased 5% as cash flow from operations was offset in part by a $56 million, or 29%, increase in capex.

Speaker Change: Turning to free cash flow, we generated $3 2 billion of free cash flow in 2023 for the full year cash from operations increased $216 million year over year, or 7%, reflecting double digit operating income growth and overall working capital optimization, partially offset by higher cash tax payments.

Speaker Change: The negative impact to working capital caused by temporary invoicing delays associated with the new system implementation, which we communicated last quarter persisted in Q4 and impacted our overall continued progress on working capital.

Speaker Change: Free cash flow increased 5% of cash flow from operations was offset in part by a $56 million or 29% increase in capex.

Christa: CapEx was $252 million in 2023 as we executed technology projects to drive long-term growth. Going forward, we expect CapEx to grow in line with the business, managed on a disciplined, ROIC-based basis. Looking forward, free cash flow will be impacted in the near term by restructuring, higher interest expense, and the expected NFP deal and integration costs. We expect to return to our trajectory of double-digit free cash flow growth over the long term, driven by operating income growth and a $500 million opportunity in working capital. As we contemplate the expected acquisition of NFT, the transaction strengthens our long-term free cash flow outlook. We expect the transaction to add over $300 million of free cash flow in 2026 and $600 million of free cash flow in 2027.

Speaker Change: Capex was $252 million in 2023, as we executed technology projects to drive long term growth.

Speaker Change: Going forward, we expect Capex to grow in line with the business managed on a disciplined ROIC basis.

Speaker Change: Looking forward free cash flow will be impacted in the near term by restructuring.

Speaker Change: Higher interest expense and the expected NSP deal and integration costs.

Speaker Change: We expect it to return to about trajectory of double digit free cash flow growth over the long term driven by operating income growth and a $500 million opportunity in working capital.

Speaker Change: As we contemplate the expected acquisition of N F T. The transaction strengthens our long term free cash flow outlook, we expect the transaction to add over $300 million of free cash flow in 2026, and $600 million of free cash flow in 2027.

Christa: Now, let me provide an update on our accelerating AON United program, which is enabling AON Business Services and our 3x3 plan. As Greg highlighted, the three-by-three plan is accelerating AON's strategy. We see particular opportunity around our business services as the catalogue. We are investing to standardize platforms and operations, drive data-analytic based product innovation, and deliver at scale to create better tools, better experiences, and greater relevance for clients and colleagues. In the fourth quarter, we incurred $129 million in restructuring-related charges, with a cash outflow of $13 million.

Now, let me provide an update on our accelerant Aon, United program, which is enabling Amazon services and a three by three plants.

Speaker Change: As Greg highlighted three by three part of accelerating our Aon United strategy.

Speaker Change: We see particular opportunity around Amazon services as the catalyst we.

Speaker Change: We are investing to standardized platforms and operations drive data analytics.

Speaker Change: Innovation.

Speaker Change: And deliver at scale to create better tools, better experiences and greater relevance to clients and colleagues.

Speaker Change: In the fourth quarter, we incurred 129 million of restructuring related charges.

Speaker Change: A cash outflow of $13 million.

Christa: We're pleased with the progress we've made in the quarter, and we've incurred 12% of the total expected cash restructure in charge. The actions we took in 2023 are expected to generate $70 million of run rate savings in 2024, contributing to the $100 million of cumulative savings we expect for the full year 2024. As mentioned, program savings were not material in 2023.

Speaker Change: We're pleased with the progress we've made in the quarter and we have incurred 12% of total expected cash restructuring charges.

Speaker Change: The actions we've taken in 'twenty two 'twenty three are expected to generate $70 million of run rate savings in 2024 contributing to the 100 million accumulative savings, we expect the full year 2024.

Speaker Change: As mentioned program savings were not material in 2023.

Christa: As we've said previously, we look at the opportunity in AON Business Services and across our client-facing capabilities. We know delivering our strategy will result in long-term progress against our key financial metrics and will drive more value for clients, colleagues, and shareholders. Turning now to capital allocation, we allocate capital based on return on capital and long-term value creation.

Speaker Change: As we said previously we look at the opportunity in Aon business services and of course, our client facing capabilities. We know delivering our strategy will result in long term progress against our key financial metrics and we will drive more value for our clients colleagues and shareholders.

Speaker Change: Turning now to capital allocation, we allocate capital based on return on capital and long term value creation.

Christa: I'd note over time we've driven value creation through core business results, share buybacks, and acquisitions. As you look historically, we have a successful track record balancing acquisitions and dispositions of all sizes and share buybacks. Given our strong outlook for free cash flow over the long term, we expect share purchase to continue to remain our highest return on capital opportunity for meaningful ongoing capital allocation. We believe we are significantly undervalued in the market today, highlighted by the $2.7 billion of share purchase in 2023. We expect to continue to invest organically in content and capabilities we can scale across the firm, and we'll continue to assess priority areas for inorganic investment, noting our M&A pipeline continues to be focused on our global priority areas that will bring scalable solutions to our clients' growing and evolving challenges. We will continue to assess all capital allocation decisions on an ROIC-based basis.

Speaker Change: Over time, we've driven value creation through coal business results share buyback and acquisitions.

Speaker Change: As you look historically, we have a successful track record balancing acquisitions and dispositions of all sizes and share buyback.

Given our strong outlook for free cash flow of the long term, we expect share repurchases to continue to remain our highest return on capital opportunity for meaningful ongoing capital allocation.

We believe we are significantly undervalued in the market today highlighted by the $2 7 billion of share repurchase in 2023.

We expect to continue to invest organically in content and capabilities, we can scale across the firm and we will continue to assess priority areas for inorganic investments, noting our M&A pipeline continues to be focused on our global priority areas that will bring scalable solutions to our clients growing and evolving challenges.

Speaker Change: We will continue to assess all capital allocation decisions on an ROIC basis, letting we ended 2023 with an ROI state, especially three 1% an increase of nearly 2100 basis points over the last 12 years, reflecting our track record of balancing growth and returns to create long term value.

Christa: Loading, we ended 2023 with an ROIC of 33.1%, an increase of nearly 2,100 basis points over the last 12 years, reflecting our track record of balancing growth and returns to create long-term value. I'd note ROIC will initially be negatively impacted after the expected acquisition of NSP. We expect it to improve over time as we execute our new United strategy to drive long-term value creation. Our expected acquisition of NFP is consistent with our proven capital allocation framework.

Speaker Change: I'd note Rossi will initially be negatively impacted after the expected acquisition of NFC.

Speaker Change: We expect it to improve over time, as we execute our aon United strategy to drive long term value creation.

Speaker Change: Our expected acquisition of NFPA is consistent with our proven capital allocation framework. It enables us to put capital to work at scale and strengthen our free cash flow profile in the long term, which will continue to allocate to drive shareholder value creation.

Christa: It enables us to put capital to work at scale and strengthen our free cash flow profile in the long term, which will continue to be used to drive shareholder value creation. Between now and the expected close of the deal, we expect discretionary capital allocation will continue to be much more weighted towards share buyback, given the commitments we've made around NFPs. Following the expected close of NFP, free cash flow will be impacted in the near term by deal and integration costs and higher interest expense for transaction-related debt.

Speaker Change: Between now and they expect to close the deal we expect discretionary capital allocation will continue to be much more weighted towards share buyback given the commitments we've made around NSP.

Speaker Change: Following the expected close of NSP free cash flow will be impacted in the near term by deal and integration costs and higher interest expense, but transaction related that.

Christa: And as we take steps to de-lever our balance sheet and return metrics to levels consistent with our current credit ratings profile. 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-ladded debt maturity profile. We remain committed to maintaining our current investment grade credit rating.

Speaker Change: And as we take steps to Delever, our balance sheet and return metrics to levels consistent with our current credit ratings profile.

Speaker Change: Turning now to our balance sheet and debt capacity, we remain confident in the strength of our balance sheet and manage liquidity risk for a well lettered debt maturity profile, we remain committed to maintaining our current investment grade credit ratings we.

Christa: We expect to continue adding debt supported by EBITDA growth until we complete the expected acquisition of NFP and expect to maintain our current rating. As we've previously communicated, we expect to fund the cash portion of the purchase with approximately $7 billion of new debt, with $2 billion borrowed at close and $5 billion raised in 2024 across a range of maturities subject to market conditions. Following the transaction-related debt issuance in 2024, we expect to incur approximately $12.5 million of negative interest carry expense per quarter until deal close.

Speaker Change: We expect to continue adding debt supported by EBITDA growth until we complete the expected acquisition of N F P and expect to maintain our current ratings.

Speaker Change: As we've previously communicated we expect to fund the cash portion of the purchase with approximately $7 billion of new debt.

Speaker Change: With 2 billion BARDA clothes, and 5 billion raised in 2020 full across a range of maturities subject to market conditions.

Speaker Change: Following the transaction related debt issuance in 2024, we expect to incur approximately $12 5 million of negative interest carry expense per quarter until deal close.

Operator: As we've previously communicated, the financing and capital management plan contemplated in this transaction is consistent with maintaining our current investment-grade credit profile. We expect our credit ratios to be elevated over the 12 to 18 months post-close, and we expect to bring our leverage ratios back in line with levels consistent with our credit profile, driven by substantial free cash flow generation and incremental debt capacity from EBITDA growth, noting our track record of effectively managing leverage within our current ratings. In summary, in 2023, we delivered strong operational performance, contributing to continued progress against our AON United strategy. Our strong financial results and disciplined capital management enabled us to return $3.2 billion to shareholders through share repurchases and dividends. The steps we've taken around our 3x3 plan are accelerating our AON United strategy, catalyzed by AON Business Services, and reinforced by the restructuring program and our expected acquisition of NFP.

Speaker Change: As we previously communicated the financing and capital management plan contemplated in this transaction is consistent with maintaining our current investment grade credit profile, we expect our credit ratios to be elevated over the 12 to 18 months post close and we expect to break out our leverage ratios back in line with levels consistent with our credit profile driven by substantial free.

Speaker Change: Cash flow generation and incremental debt capacity from EBITDA growth, noting our track record of effectively managing leverage within current ratings.

Speaker Change: In summary in 2023, we delivered strong operational performance contributing to continued progress against our Aon United strategy Astra.

Our strong financial results and disciplined capital management enable us to return $3 3 billion shareholders through share repurchase and dividends.

The steps we've taken around at 353 plant are accelerating and you know the strategy catalyzed by Aon business services and reinforced by the restructuring program and our expected acquisition of NXP we.

Operator: We remain incredibly excited about the opportunity to continue to drive top and bottom line results, to drive value for clients, colleagues, and shareholders and look forward to building on this momentum in 2024. With that, I'll turn the call back over to the operator, and we'd be delighted to take your questions. Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question today, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue.

Speaker Change: We remain incredibly excited about the opportunity to continue to drive top and bottom line results to drive value for our clients colleagues and shareholders and look forward to building on this momentum in 2024.

Speaker Change: With that I'll turn the call back over to the operator, and we'd be delighted to take your questions.

Speaker Change: Thank you, we'll now be conducting a question and answer session.

Speaker Change: If you'd like to ask a question today. Please press star one from your telephone keypad a.

Speaker Change: A confirmation tone will indicate your line. This is the question queue.

Speaker Change: You May press star two if you'd like to Australia question from the queue.

Andrew Klingerman: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Once again, that's star one. Thank you. Thank you, and our first question today will be coming from the line of Andrew Klingerman with TD Kallen. Please proceed with your question. Thank you. Thank you, and good morning.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please pull for questions, what's going to hit Star one thank you.

Speaker Change: Thank you and our first question today will be coming from the line of Andrew Cleveland with TD Cowen. Please proceed with your question. Thank you.

Thank you and good morning.

Greg: I'm kind of interested in the robust growth in both the re-insurance business and the health solutions business and the sustainability there. For re-insurance, with 14% organic growth, was it largely driven by the capital markets and advisory? And how sustainable do you think that could be?

Andrew Cleveland: What is interesting in the robust growth in both the <unk>.

Andrew Cleveland: Reinsurance business in the health solutions business and then the sustainability there.

On reinsurance with 14% organic growth.

Andrew Cleveland: Was it largely driven by the capital markets and advisory and how sustainable do you think that can be and then on the on.

Eric: And then on the consumer benefits solutions inside of health, um, you know, what actually drove the consumer benefits solution strength? Well, Andrew, let me start, and Eric can chime in here as well. Start Overall, really, we're really pleased with how we closed the year on the growth story overall, when you think about the 7% across the firm, really strong momentum as we go into 2024. But you're right, reinsurance and health, absolutely phenomenal, and the teams were absolutely terrific. And I would, you know, highlight the quarter but also highlight the year.

On the consumer benefit solutions side of health.

Andrew Cleveland: Hmm.

Andrew Cleveland: What actually.

Andrew Cleveland: What actually drove the consumer benefits solution strained.

Speaker Change: So, let's start and Eric can chime in here as well start overall.

Speaker Change: Really pleased where they'll be close to your own growth story overall.

Eric: Across the firm.

Eric: Really strong momentum as we go into 2024, but you are right, our reinsurance and health absolutely phenomenal teams were out.

Eric: Terrific.

Eric: And I would highlight the quarter, but also highlight the year. When you think about reinsurance across the year of 10% in health, which is a 10% double digit. It really is a story amplified by Q4, but really across the year and has been highly consistent when you think about the description around the three by three plan of risk capital and human capital. Both of these approaches contributed to <unk>.

Greg: When you think about reinsurance across the year at 10% and health solutions at 10% double digit, it really is a story amplified in Q4, but really across the year. And it's been highly consistent when you think about the description around the three by three plan and risk capital and human capital. Both of these approaches contributed to growth sort of in the context of health and reinsurance and gave us great momentum as we go into 2024. But maybe Eric, a little texture on both pieces for the year and the quarter.

Eric: Sort of in the context of health and reinsurance and give us great momentum as we go into 'twenty 'twenty, four, but maybe Erik a little texture on both on both pieces for the year on record.

Eric: Sure, Greg. It's a great question. And just to reaffirm, just a fantastic team operating really on fire. I would say in Q4, to go to your question, there was record cap bond issuance for the quarter, but we also had very strong growth in treaty and FAC. So across the board, good. And I would say that the trends that we have been seeing over the last couple of years, I think have an opportunity to continue. Certainly, whether it's climate change, whether it's, you know, the casualty uptick in terms of lost costs, whether it's, you know, opportunities from a profitability standpoint that our insurers are dealing with from their own books of business, the need for data analytics, the need for capital support as a position, their primary businesses are all still there, and it's a global answer. So we're seeing it in Europe So we're really optimistic about the business and feel like it's really well-preserved. And then maybe on the health side, just to comment on the health side, I think the same thing, right?

Erik: Sure Greg.

Erik: Question on just to reaffirm just a fantastic team operating.

Erik: Really on fire I would say in Q4 to go to your question. There was record cat bond issuance for the quarter, but we also had very strong growth in.

Erik: <unk> and Fox so across the board good and I would say that the trends that we have been seeing over the last couple of years I think have an opportunity to continue certainly whether it's climate change whether it's cash.

Erik: Casualty uptick in terms of loss cost, whether it's opportunities from a profitability standpoint that our insurers are dealing with from their own books of business.

Erik: The need for data analytics, the need for capital support as they position their primary businesses are all still there and it's a global answer so we're seeing it in Europe, and Asia Pacific as well as strength in North America, and the U K so well.

Erik: We're really optimistic about the business I feel like is really well positioned.

Erik: And then maybe on the health side, just wanted to comment on the health side.

Erik: I think same thing right. We've had we had great wins in the core health and benefit business and as you mentioned the consumer business.

Eric: We've had great wins in the core health and benefit business, and as you mentioned, the consumer business across the globe, whether led by EMEA, the UK, or the US, and it really was new logos for us in core health and benefits. I think on the consumer side, the ability to offer unique products to the consumer part of our corporate clients is really a strength of the firm, and those products evolve, and I think they're meeting the needs of the individual consumer, and we also see that as an opportunity to continue to grow. Excellent

Erik: Across the globe, whether led by EMEA U K U S and a real.

Erik: It was new logos for us on core health and benefits I think on the consumer side the ability to offer.

Erik: Unique products to the consumer part of our.

Erik: Our corporate clients is really a strength of a firm and those products evolve and I think they are meeting the needs of the individual consumer and we also see that as a <unk>.

Erik: Opportunity to continue to grow.

Interviewer: Excellent and then just lastly.

Andrew Klingerman: And then just lastly, on M&A, I guess, you know, in the slides, you talked about potentially growing organically and inorganically there. Do you think M&As are a real possibility in the next year or two as you kind of await a conclusion on the NFP acquisition? And if you are interested in M&As, what would some of those targeted businesses be?

On M&A I guess.

Speaker Change: In the slides you talked about potentially growing organically and Inorganically. There do you think M&A is our <unk>.

A real possibility in the next year or two as you kind of a wait of a conclusion on the N F. P acquisition and if you are interested in M&A is what would be some of those targets targeted businesses, where you'd like to be.

Speaker Change: So Andrew to start overall as Christa described we continue to look as we think about deployment of capital obviously buyback.

Greg: So Andrew, to start overall, as Christa described, you know, we continue to look as we think about deployment of capital, obviously, buyback, you know, it's top of the list, given, given how undervalued we are, but we're looking across the board, even as we think about sort of the closure on the NFP front. And again, return on investment capital-based, content-based in every way, shape, or form, but we see opportunities, you know, around the world, and our pipeline continues to be very strong. But what else, Christa, would you add from a capital allocation standpoint? I mean, reinforcing exactly what you said, Greg, we allocate capital based on return on capital. We definitely, based on the free cash flow outlook in 2024, see that we are significantly undervalued, and we will disproportionately allocate that free cash flow to buybacks in 2024.

On top of the list given now given how undervalued we are but we're looking across the board even as we think about sort of the closure on the NSP front.

Speaker Change: And again return on invested capital base content based in every way share perform but we see opportunities around the world and our pipeline continues to be very strong, but what else can be derived from a capital allocation standpoint.

Speaker Change: I mean, reinforcing exactly what you said, Greg we allocate capital based on return on capital are we definitely are based on the free cash flow outlook.

Speaker Change: In 2024, and the long time C. We are significantly undervalued and we will disproportionately allocate that free cash flow to buy back in 2024.

Christa: But we do have a great M&A pipeline, Andrew, to answer your question. In areas like data analytics, if you think about the acquisition of Taiki, a fantastic acquisition in the data analytics space, in areas like health, as Eric highlighted, and so there are a number of areas that are front and center for clients in terms of meeting their emerging challenges. And if you see the right opportunity, you wouldn't hesitate to go after it, correct?

Speaker Change: But we do have a great M&A pipeline are Andrew to your question.

Speaker Change: In areas like data analytics. If you think about you know the acquisition of Tyche, you know a fantastic acquisition and the data analytics space in areas like health as as you know Eric highlighted I'd say there are a number of areas that are front and set up the clients in terms of meeting that emerging challenges.

Speaker Change: And if you see the right opportunity you wouldn't you wouldn't hesitate.

To go after it Brent.

Andrew Klingerman: And Andrew, the thing I would say is it's all about return on capital. And so given how undervalued we are, buyback is the top of the list. And for us to, you know, invest in M&A, it's got to beat buyback. And so, you know, we'll continue to look at everything.

Speaker Change: And Andrew the thing I would say is it's all about return on capital and so given how undervalued you. We all buyback is the top of the list and for us to invest in M&A, it's gonna be buyback and so you know I will continue to look at everything and there's certainly some terrific opportunities out there, but we will.

Greg: And there are certainly some terrific opportunities out there, but we'll continue to be very disciplined on return on capital. Very helpful.

Speaker Change: To be very disciplined on returns on capital.

Speaker Change: Very helpful. Thank you.

Michael Zaremski: Our next question is from the line of Mike Zaremski with BMO Capital Markets. Please proceed with your question. Hi, good morning. This is Jack on behalf of Mike.

Speaker Change: Thank you. Our next question is from the line of Mike Zaremski with BMO capital markets. Please proceed with your questions.

Speaker Change: Hi, Good morning, this is Jack on for Mike.

Christa: A question on organic growth. In your footnotes, it says that organic growth benefited by 1% from a business held for sale. Which segment did that impact? And will that have a similar impact until the business is sold? So, thanks so much for the question, Jack. We will continue to manage the portfolio actively. These are businesses that we are divesting, and so we think about this as just a better representation of our revenue and business going forward. It is in commercial risk, and we communicated the 1% impact in Q4 and for the full year. Thank you.

Jack: A question on organic growth and your footnote that says, but organic growth benefited by 1% from a held for sale business on which segment that that impact will that have a similar impact until the business is sold.

Speaker Change: So thanks, so much for the question Jack we do continue to manage the portfolio actively these are businesses that we are divesting and so we think about this as just a better representation of our our revenue and business going forward.

Speaker Change:

Speaker Change: It isn't commercial risks and we communicated the 1% impact in Q4 and for the full year.

Speaker Change: Got it thank you.

Michael: And then, second question, you call out again this quarter the decline in global M&A activity as being a source of organic growth deceleration from prior periods. Would you be able to offer any color on what percentage of AON's revenues touch M&A spend? Is it a big enough driver to continue negatively impacting growth given that M&A volumes are still falling by double digit levels? So, Michael, you step back.

Jack: And then second question you call out again this quarter decline in global M&A activity as being a source of organic growth deceleration.

Jack: Prior periods would you be able to offer any color on what percentage of <unk> revenues touch M&A expense is it a big enough drivers impact to continue negatively impacting growth given that M&A volumes are still falling by double digit levels.

Jack: So Michael do you step back it's been a continuation of what we've talked about throughout the overall year in terms of sort of where we are.

Greg: It's been the continuation of what we talked about throughout the overall year in terms of sort of where we are. And we would observe, by the way, we held serve. You think about Q4'23 versus Q4'22, you know, stayed on four and four. So it's sort of the same year over year, even against this headwind. And we haven't disclosed sort of the details and sort of, you know, the impact, but it's substantial. We've got an amazing group of colleagues who serve this marketplace. And as Eric has mentioned before on prior calls, we have doubled down on its capability. We fully anticipate this is going to come back in full force. The amount of dry powder out there is, as you know well, extensive.

Jack: And we would observe by the way we held serve if you think about Q4 'twenty three versus Q4 'twenty two stayed on for enforcement sort of same year over year, even against this headwind.

Jack: And.

Jack: And we havent disclosed sort of the detail on sort of the impact that has substantial we've got an amazing group of colleagues who serve this marketplace and as Eric has mentioned before on prior calls we have doubled down in its capability. We fully anticipate this is going to come back in absolute full force.

Jack: The amount of dry powder out there as you know well is extensive.

Eric: We remind you, you know, it shows up in our organic when the deal is complete. And we see lots of we see lots of things in the pipeline as sort of things are coming to pass. And we fully expect, you know, over the course of 2024 to see a return. But this is meaningful for us. And we've been able to work it very, very strongly and maintain growth across the board, even in the face of this headwind. Eric, what else would you add? Greg, I think you described it perfectly. Just maybe one little bit of color.

Jack: Remind you it shows up in our organic when the deal is complete.

And we see lots of we see lots of things in the pipeline is it sort of things are coming to pass and we fully expect over the course of 'twenty 'twenty four to see a return, but this would be useful for us and we've been able to work at very very strongly and and maintain growth across the board even the face of those headwinds that Erik what else would you add to that.

Jack: Greg I think you described it perfectly just maybe one little bit of color. This week for example, we held a call.

Greg: This week, for example, we held a conference where we had 400 members of the private equity community, the corporate M&A, corp dev teams, the insurance markets, the reps and warranties, tax indemnity, PIP, and we essentially were going through the marketplace, Just from a growth standpoint, but also from a product innovation standpoint, recognizing that as the deals return, and they will, we want to make sure we're well situated with the clients, with the markets, making sure the products are fit for purpose and are evolving to meet the needs, not just here in the U.S., but in Europe and other places where, you know, when it returns, we have made that commitment. We want to hold the team so that we're ready and front and center when the deals start to happen. Thank you.

Greg: <unk>, where we had 400 members of the private equity community. The corporate M&A Corp, Dev teams reinsurance markets, the reps and warranties tax indemnity.

Greg: And we essentially were going through the marketplace.

Greg: From a growth standpoint, but also from a product innovation standpoint, recognizing that as the deals return and they will we want to make sure. We're well situated with the clients with the market's making sure. The products are fit for purpose and are evolving to meet the needs not just here in the U S, but in Europe, and other places where.

Greg: When it returns we made that commitment we want to hold the team so that we're ready and front and center when the deal will start to happen.

Greg: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next questions are from the line of Jimmy Buhler with J P. Morgan. Please proceed with your questions.

Rob Cox: Our next questions are from the line of Jimmy Bhullar with J.P. Morgan. Please proceed with your question. Good morning.

Jimmy S. Bhullar: So first, just following up on the whole M&A discussion, it seems like capital markets activity is beginning to pick up, and the investment banks are seeing that across the board. So wondering if you're seeing any signs of that in your business as well, or is it more your hope that things will pick up in 2024, but you haven't seen any of it? Jimmy, we're seeing exactly the same thing you're seeing and hearing about. Listen, you can imagine this is a market we're highly connected to, with clients and with all the banks and everyone else involved in the process. And I would say there are high expectations everywhere.

Jimmy S. Bhullar: Hey, good morning, So first just following up on the whole M&A discussion it seems like.

Jimmy S. Bhullar: Capital markets activity is beginning to pick up and the investment banks are seeing that across the board. So.

Jimmy S. Bhullar: Wondering if you're seeing any signs of that in your business as well or is it more your hope that things will pick up in 'twenty 'twenty four but you haven't seen any of it.

Jimmy S. Bhullar: Jimmy we're seeing exactly the same thing youre seeing and you're hearing about and listen you can imagine. This is a this is a market where highly connected to with clients and with.

Jimmy S. Bhullar: With all the banks and everyone else involved in the process.

Jimmy S. Bhullar: And you know I would say there is high expectations everywhere, you'd only listen to the investment bank.

Greg: You need only listen to the investment bank quarterly calls to sort of understand that. And so we've certainly seen lots of potential. And as Eric described, the amount of capital on the sidelines ready to return is high. And we're incredibly well positioned to do that. But I would say, as I mentioned before, it shows up organically for us as the deals are completed.

Jimmy S. Bhullar: Quarterly calls to sort of understand that.

And so we certainly see lots of potential and as Erik described the amount of capital on the sidelines ready to return is high and we're incredibly well positioned to do that but I would say as I mentioned before it shows up in organic for us as the deals are completed and so as you see that move you can expect it's going to be fully fully reflected in our performance.

Jimmy S. Bhullar: And so as you see that move, you can expect it's going to be fully reflected in our performance. Okay, and then on commercial brokerage, we have organic growth of 4%. I think you mentioned double-digit growth in Asia Pacific, which is obviously good, but it also suggests that the US is very big and maybe close to flat, which seems a little odd given GDP growth pricing and also just trends that other brokers have reported. So what's really going on in the US that's pressuring growth to be flat despite some of the tailwinds in the economy overall?

Speaker Change: Okay, and then on commercial brokerage the organic growth of 4% I think you mentioned double digit growth in Asia Pacific, which is obviously good but it also suggests that the U S is very big and maybe close to flat.

Speaker Change: Which seems a little odd given GDP growth pricing and then also just trends that other brokers.

Speaker Change: Brokers have reported so what's really going on in the U S. That's pressuring the growth.

Speaker Change: The two being flat despite some of the tailwind in the economy overall.

Greg: Yeah, I would start overall. Your overall assertion can see where you're getting to, but it really doesn't reflect what's going on in reality. Obviously, the businesses are very, very different sizes. So one doesn't really offset the other in any way, shape, or form.

Speaker Change: Yes, I would start overall your overall assertion can see where youre getting too, but really doesn't reflect what's going on in reality. Obviously the businesses are very very different sizes. So one doesn't really offset the other in any way shape or form we would come back to the overall commercial risk story is exactly what we described before which is listen we are exactly where we were in Q4 of last year. It was in emerge.

Greg: We would come back to the overall commercial risk story, which is exactly what we described before, which is, listen, we're exactly where we were in Q4 of last year with, you know, it was an emerging headwind that became a substantial headwind. But we overcame that. And a lot of this is not just commercial risk but the connection between commercial risk and reinsurance and risk capital. And as we closed the year, you know, we'd observed some others in the market seem to be retreating; we're not retreating at all. It's 4% versus 4% of last year, and we're going into 24 with a lot of momentum.

<unk> headwind and became a substantial headwind, we overcame that and a lot of this is not just commercial risk, but the connection of commercial risk and reinsurance and risk capital and we closed the year, we'd observed some other than the markets seem to be retreating we're not retreating at all at 12% versus 4% of last year and we're going into 'twenty. Four is a lot of momentum. So we're very excited about the <unk>.

Greg: So we're very excited about the overall prospect as we move into 2024. And maybe we could talk a little bit about the risk capital implications of all this coming together and the potential around it. Yeah, sure, Greg.

Overall prospect as we move into 2024.

Speaker Change: Maybe talk a little bit about the risk capital implications of all this is coming together and the potential around it.

Speaker Change: Yeah sure, Greg I think certainly strong retention and strong new business.

Eric: I think certainly strong retention and strong new business, both in North America and around the world, and that commercialized business is important. But maybe, maybe I'll use it as an opportunity to show the connectivity between, sort of, the risk capital framework, and maybe I'll talk about the cap bond that I know we wanted to get some airtime on.

Speaker Change: Both in North America, and around the world and our commercial risk business is important but maybe.

Speaker Change: Maybe I'll use it as an opportunity to show the connectivity between sort of the risk capital framework and I'll, maybe I'll talk about the cat bonds that we wanted to get some air time on.

Eric: We did the first ever cyber cap bond in the quarter, which was a great opportunity for our team working with one of our insurance company clients to take the systemic, you know, cyber risk and get it into the capital markets, which does two things. It actually allows the insurer to open up the amount of limit they provide to clients, which was something that our clients were looking for. And it also appropriately values and places that type of systemic risk into the right capital sources. But the point is, we were then able to take that ILS structure, using the data and analytics that we did to build it, and use it to build an ILS structure for one of the largest corporations in Europe, who were looking for a traditional sort of cyber program but weren't able to get the limit they wanted.

Speaker Change: We did the first ever cyber cat bond in the quarter.

Speaker Change: Which was a great opportunity for the for our team working with one of our insurance company clients to take the systemic.

Speaker Change: Cyber risk and get it into the capital markets, which does two things. It actually allows the insurer to open up the amount of limit they provide the clients, which was something that our clients were looking for and it also appropriately values in places that type of systemic risk into the right capital source, but the point of it as we were then able to take.

That ILS structure, using the data and analytics that we did to build that and used it to do in Iowa structure or one of the largest corporates in Europe, who was looking for traditional sort of cyber program, but wasn't able to get the limit they want it so taking something that we did for an insurer using the data and analytics and structuring.

Eric: So, taking something that we did for an insurer, using the data and analytics and structuring, bringing it to a large corporate, and maybe finishing it, because Greg, I know you mentioned NFP in your opening comments, and just to tie it through, able to take the same data and analytics that we used to build the cap on, and then the corporate structure, to actually power the PsyQ product that is built for the middle market, which then attache So, again, using data and analytics on one topic, just cyber, to actually drive growth in reinsurance, in commercial risk, and ultimately in the middle market, part of the commercial risk segment. So, that's what's driving retention, that's what's driving new business, and I think those opportunities exist for us across multiple areas. Thank you. Our next question is from the line of Bob Wong with Morgan Stanley. Hi, good morning.

Speaker Change: Bringing you to a large corporate and maybe finishing as Greg I know you mentioned in your opening comments just to tie it drew able to take the same data and analytics that we use to build the cat bonds and then the corporate structure.

Speaker Change: Actually power of the <unk> product that is built for the middle market, which then attaches a risk transfer product to it so I guess using data and analytics on one topic, just fiber actually to drive growth in reinsurance and commercial risk and ultimately in the middle market part of the commercial risk segment. So that's what's driving the retention that's what's driving.

Speaker Change: The strong new business and I think those opportunities exist for us.

Speaker Change: Multiple areas.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Bob <unk> with Morgan Stanley. Please proceed with your question.

Bob: Hi, good morning.

Bob Wong: First question is about the Vestu legal settlement. Can you talk about how much of the $197 million is likely to be the full extent of the impact? In other words, in the press release, you obviously mentioned there's a potential for some of that being sent back to you. What's the progress on that?

Bob: First question is about the.

Bob: Best to a legal settlement.

Bob: Can you talk about how much of the $197 million is.

Bob: Likely to be the full extent of the impact in other words.

Bob: In the in the press release, you, obviously mentioned there was a potential some of that being sent back to you what's.

Bob: What's the progress of that can you maybe give a little bit more detail. How confident you are that some of the $197 million will be paid back to aon.

Eric: Can you maybe give a little bit more detail of how confident you are that some of the $197 million will be paid back to AON? Listen, I would just open by saying that we strategically wanted to draw a line under this issue for our market partners and for ourselves, so that we were able to move forward together as partners. And so the effort was made to come to an agreement with each of the affected parties, sorry, so that we could then continue to both trade forward and then also begin to work on recoveries together.

Speaker Change: Listen I would just I would just open by saying that we strategically wanted to draw a line under this issue for our market partners and for ourselves.

Speaker Change: So that we were able to move forward together as partners.

Speaker Change: The effort was made to come to an agreement with each of these.

Speaker Change: That could party sorry.

So that we could then continue to both one trade forward, but then also begin to work on recoveries together and so we see an opportunity for recoveries that will happen over time.

Eric: And so we see an opportunity for recoveries that will happen over time, as the bankruptcy process runs its way through. And we're confident that we'll be able to recover, you know, meaningful amounts. Okay, thank you.

Speaker Change: The bankruptcy process runs its way through and we're confident that we'll be able to recover meaningful amount.

Speaker Change: Okay. Thank you.

Bob Wong: Second question is on cash flow. I understand that you kind of mentioned this a little bit, but on your slides, you removed the double-digit growth for the near term but reiterated the long-term guidance for free cash flow. I'm assuming that it's fair to say this is mainly due to the NFP acquisition over the next two years. Is it safe to assume that, like, is that the reason?

Speaker Change: Second question is on on cash flow I understand that you kind of mentioned this a little bit.

Speaker Change: On your slides you remove the double digit growth for the near term, but reiterated our long term guidance for free cash flow.

I'm, assuming that it's fair to say that this mainly due to the N F. P acquisition over the next two years.

Speaker Change: Is it.

Speaker Change: Safe to assume that like is that the reason and can you maybe give a little bit more context in terms of how youre thinking about free cash flow guidance going forward.

Christa: And can you maybe give a little bit more context in terms of how you're thinking about free cash flow guidance going forward? Yeah, thanks so much for the question. So firstly, I'd reiterate your point, which is we are incredibly confident in the long-term free cash flow growth of double digits and extremely excited about how NFP accelerates the long-term free cash flow growth of AON, adding $300 million in free cash flow in 2026 and $600 million of free cash flow in 2027. And look, as we think about free cash flow in 2024, we haven't given specific guidance, but here We expect to grow free cash flow driven by operating income growth and improvements in working capital.

Speaker Change: Yeah. Thanks, so much for the question, so, especially I.

Speaker Change: Reiterate your point, which is we are incredibly confident in the long term free cash flow growth of double digits.

Speaker Change: And extremely excited about how N S P.

Speaker Change: <unk> accelerates the longtime free cash flow growth of Aon are adding $300 million in free cash flow in 2026, and 600 million of free cash flow in 2027 and look as we think about free cash flow in 2024, we haven't given specific guidance, but here's how I think about it we expect to grow free cash flow driven by operating income growth and <unk>.

Speaker Change: Prove it from working capital.

Christa: We do expect ongoing cash tax headway. We've communicated the restructuring program, though we haven't given specific guidance around the timing of the cash impact, and we've talked about the impacts of NFP. We don't expect to incur material costs before close, and we've said we will expect to incur 12.5 million of negative interest carry expense per quarter until deal close following a transaction-related debt issuance.

Speaker Change: We do expect ongoing cash tax headwind, we've communicated the restructuring program that we haven't given specific guidance around the timing of the cash impact.

Speaker Change: And we've talked about the impacts of an F. N F. P. We don't expect to incur a material costs before close and we've said, we expect to incur $12 5 million of negative interest carry expenses are closer until deal closed following the transaction related debt issuance.

Christa: We've said CapEx will grow in line with the business from $252 million in 2023. We've communicated legal settlements, and as Eric just said, expect those to flow through over the next several years, noting there will be meaningful recovery. Ultimately, we expect to deliver underlying free cash flow growth, and we're targeting double digits as we move past the negative impacts of restructuring and NFP. I'm very excited about the long-term double-digit free cash flow trajectory of AON. Lastly, in 2024, we do expect a disproportionate majority of the free cash flow to be allocated to buyback, given we're operating on a return-on-capital basis, and we are substantially undervalued today. I really appreciate the color.

Speaker Change: You said Capex will grow in line with the business from $252 million in 2023, we've communicated legal settlements and as Eric just said expect those to flow through over the next several years, knowing that will be meaningful recoveries.

Speaker Change: Ultimately, we expect to deliver underlying free cash flow growth and were targeting double digits as we move past the negative impacts of restructuring and NFPA very excited about the long term double digit free cash flow trajectory of Aon Lastly.

Speaker Change: Lastly in 2024, we do expect a disproportionate majority of the free cash flow to be allocated to buybacks, given where operating on a return on capital basis, and and we are substantially undervalued today.

Speaker Change: I really appreciate the color. Thank you for reiterating that thank you.

Bob Wong: Thank you for reiterating that. Thank you. Our next questions are from the line of Rob Cox with Goldman Sachs. I'm pleased to see you with your questions.

Speaker Change: Our next questions are from the line of Rob Cox with Goldman Sachs. Please proceed with your questions.

Rob Cox: Yeah. Thanks for taking my question maybe.

Rob Cox: Hey, thanks for taking my question. Maybe just the first question on, you know, one of the higher growth areas of insurance. And in thinking about the higher growth areas, one of those is currently the E&S space, and I was just curious how AON thinks internally about the feasibility of owning a wholesale broker. And is there any reason to think that could potentially be a good fit? Maybe I'll take a stab at that one.

Maybe just the first question on.

Rob Cox: Now one of the higher growth areas of insurance.

Rob Cox: And in thinking about the higher growth areas one of those as is currently the E&S space now.

Rob Cox: And I was just curious on how aon things internally.

Rob Cox: The feasibility of owning a wholesale broker and is there any reason to think that could potentially be a good fit.

Eric: Thanks for the question. Listen, there's been explosive growth in the wholesale market over the last five to seven years, you know, on the magnitude of tenfold. And there's a lot that's driving it, right?

Speaker Change: Maybe I'll take a stab at that one thanks for the question listen there's been.

Speaker Change: Explosive growth in the wholesale market over the last or the E&S market over the last five to seven years.

Speaker Change: On the magnitude of tenfold and Theres a lot thats driving it right whether it's the losses that you see in the property market, whether it's regulatory pressure on pricing and forms and there is a lot to it.

Eric: Whether it's the losses that you see in the property market, whether it's regulatory pressure on pricing and forms, there's a lot to it. We have consolidated our wholesale relationships so that we're actually working in partnership to get access to that capital when we need it for our clients. Some of our competitors do own wholesalers, and that's the way they chose to enter the marketplace. So it's something we always look at. But we like where we are today.

Speaker Change: We have consolidated our wholesale relationships. So that we're actually working in partnership to get access to those to that capital when we needed for our clients.

Speaker Change: Some of our competitors do own wholesalers and that's the way they chose to enter into the marketplace. So it's something we always looked at it.

Speaker Change: But we are we like where we are today.

Speaker Change: And we like the we.

Rob Cox: And we like the relationships that we have with our major partner, as we need them. That marketplace tends to flex up and down with different market cycles. And so I would say right now, based on the challenging market conditions, especially in the property area, it's significant growth, but it'll ebb and flow over time.

Speaker Change: We like the relationships that we have with our major partner.

Speaker Change: As we need.

Speaker Change: That marketplace tends to flex up and down with different market cycles, and so I would say right now it is based on the challenging market conditions, especially in the property area.

Speaker Change: It's significant significant growth, but it.

Speaker Change: It will ebb and flow over time.

Eric: I appreciate that. And maybe just to follow up on pricing. I think some of the other brokers have talked about expectations for fairly stable BNC pricing in 2024, and I'm curious if AON shares that view, or if there's any other color you would want to add to the pricing trajectory. I think a number of people have commented on it during this earnings season. I would say that we're probably heading towards a market where there is more of a series of markets, where you see price competitiveness in certain areas, where new capital has been drawn in. DNO, for example, would be one that's been called out.

Speaker Change: Got it I appreciate that and maybe just to follow up on pricing.

Speaker Change: Some of the other brokers have talked about expectations for fairly stable P&C pricing in 2024.

I'm curious if aon shares that view, if there's any other color you would want to add on the pricing trajectory.

Speaker Change: So I think a number of people have commented on it during this earning season I would say that we're probably heading towards the market.

Speaker Change: Where it's more of a series of markets, where you see price competitive price.

Speaker Change: Price competitiveness in certain areas, where new capital is drawn in D&O. For example would be one that's been called out you'll also see challenges still in certain parts of the property.

Greg: You also see challenges still in certain parts of property, and people are a little worried about casualty as social inflation. Some nuclear verdicts have kind of hit the wires, and they're worried about prior year reserves. So I think rather than just a rising market for all, what we're going to see over 24 and 25 is that it's going to be very product specific and very risky, which is something that plays well for us because it allows us to use our teams and our analytics to be able to help them think through how they either want to trade or manage the risk. And so, but I think that's where we see the market going at 24-20. I might just add, Rob, as well, if you think about impact as it relates to our overall performance, bringing it back to AON, we talked about mid-to-mid or greater, and we don't see anything changing that view. Again, pricing is one aspect.

Speaker Change: People are a little worried about casualty has.

Speaker Change: Social inflation from nuclear verdicts have kind of hit the wires and they're worried about prior year reserves. So I think rather than just a rising market for all what were going to see over 24 and 25.

Speaker Change: It is going to be very product specific and very risk specific which is something that I think plays well to us because it allows us to use our teams and our analytics to be able to help them think through how they either want to trade or manage the risks.

Speaker Change: So, but I think that's sort of where we see the market going at 'twenty four 'twenty five.

I might be just add Rob as well you know as you think about impact as it relates to our overall performance with bringing it back to Aon, we've talked about Neptune or greater we don't see anything changing that view.

Speaker Change: Pricing is one aspect, where you talked about market impact, which includes insured values and a number of other pieces that fit into the equation our ability to work with clients in any type of marketplace in our advantage in doing so and so our view is.

Eric: We talked about market impact, which includes insured values and a number of other pieces that fit into the equation. Our ability to work with clients in any type of marketplace and our advantage in doing so. And so our view is, you know, the market will be what it will be, a series of markets, as Eric just described, but our ability to deliver mid-to-mid or greater, we feel like we're going into 24 with a lot of them. I appreciate that. Thanks.

Speaker Change: Market will be what it will be a series of markets as Eric has just described.

Speaker Change: Our ability to deliver mid single digit or greater we feel like we're going into 'twenty four with a lot of them on demand.

Speaker Change: I appreciate that thanks.

Elyse Greenspan: Our next question is in the line of Elyse Greenspan with Wells Fargo. Please proceed with your question. Hi, thanks. Good morning.

Our next question is from the line of Elyse Greenspan with Wells Fargo. Please proceed with your questions.

Elyse Greenspan: Hi, Thanks, Good morning, I wanted to come back on to commercial risk.

Christine: I wanted to come back to commercial risk. You know, you guys said I guess there was a 1% impact on the amount of business that you put up in dispositions in the quarter overall, right? So that would imply if it impacted commercial risk, that was 2% of the segment, which would bring your organic to 2% before that adjustment. And I know you've highlighted the M&A and the SPAC and the IPO slowdown. And I think, Greg, in response to your question, you pointed out that the U.S. probably would not have been flat, right, that we couldn't really back into that. But what is actually impacting commercial risk away from the M&A and SPAC business, that, you know, aside from this disposition, the growth would have been 2%? Christine, you might be on mute.

Elyse Greenspan: You guys said I guess, there was a 1% impact.

Elyse Greenspan: Business that you put out and dispositions in the quarter overall right. So that would imply if if it impacted commercial risk that was 2% in the segment, which would bring your organic to 2% for that adjustment and I know you've highlighted the M&A in the stack and the IPL slow down and I I think ragen response.

Speaker Change: On your question.

You pointed that the U S probably would not have been flat right that there is.

Speaker Change: If you couldn't really back into that but what is actually impacting commercial risk away from the M&A and snack business that you know aside from this disposition the growth would've been 2%.

Speaker Change: Christine you might be on mute.

Christa: Sorry. So, Elyse, one of the things I wanted to clarify was on the held-for-sale item. It is across a couple of solution lines, and we didn't disclose the specifics. But we are divesting this business, and so we think it's a much better representation of our organic revenue growth and the go-forward business. And then, as we continue to describe, the major impact on commercial risk is the M&A and IPO environment, and that has remained depressed. And Eric and Greg have outlined how they see that, you know, recovering in 2024. But Eric, would you like to add anything here?

Christine: Oh, sorry, so at least one of the things I wanted to clarify was on the held for sale item. It is across a couple of solution lines and we didnt disclose the specifics but.

Christine: But we we are divesting this business and so we think it's a much better reference than patient of our organic revenue growth and the go forward business.

Christine: And then as we continue to describe the major impact on commercial risk is the M&A and IPO environment.

Christine: And that has remained depressed and Eric and Greg I've outlined how they see that.

Christine: Recovering in 'twenty 'twenty, four but Eric would you like to add anything here.

Eric: You know, Christa, the only thing I would add, as I mentioned it before, is stronger business growth, strong retention, and rollover for our clients in North America and around the world. So the underpinnings of the business continue to be very strong. Okay, that's helpful.

Eric: Chris the only thing I would add I mentioned it before is stronger business growth strong retention and rollover for our clients in North America and around the world So of.

Eric: The underpinnings of the business continued to be very strong.

Speaker Change: Okay, that's helpful and.

Elyse Greenspan: And then as we, you know, we, one question I had on reinsurance, right, obviously, the lower volume quarter, we went through kind of what drove the growth in the fourth quarter. As we think about, you know, the Q1 in 24, right, we've heard about the renewals that, you know, January 1, you know, being good, but obviously, price increases came down because they were so strong last year. How do we think about reinsurance organic growth in a still strong, you know, but decelerating price increase environment? Maybe I'll take that one, Greg.

Speaker Change: And then as we are you know we.

Speaker Change: One question I had on reinsurance right, obviously, it's a lower volume quarter, and we went through kind of what drove the growth in the fourth quarter as we think about the coupon at 'twenty four right. We've heard about the renewals at January one.

Being good but right obviously price increases came down because they were so strong last year, how do we think about reinsurance organic growth and a still strong.

Speaker Change: But decelerating price increase environment.

Speaker Change: Maybe I'll take that one Greg I listen I think there was certainly adequate capital to get the clients needs done for the one one renewals and that's predominantly Europe and parts of North America, recognizing the Florida in Asia Pacific tend to be April and June of the year I would also say part of it was capital strategy is how do we.

Eric: Listen, I think there was certainly adequate capital to get the client's needs done for the 1-1 renewals, and that was predominantly Europe and parts of North America, recognizing that Florida and Asia Pacific tend to be, you know, April and June of the year. I would also say, you know, part of the risk capital strategy is how do we actually deploy reinsurance capability into either commercial risk or new sectors. And so just to give you an example, it's kind of early days, but I spent some time in Dubai at the COP conference, and we spent a lot of time working with, you know, various government entities around how you bring reinsurance structuring capability to help mitigate the effects of a changing climate.

Speaker Change: We actually deployed reinsurance capability into either commercial risk or new sectors, and so I'll. Just give you. An example, its kind of early days, but I spent some time in Dubai at the Copco and we spent a lot of time working with.

Speaker Change: Various government entities around how you bring reinsurance structuring capability to help mitigate the effects of the climate change and climate and so that is core reinsurance data and analytics structurally and global access to capital to a whole new sector of potential clients and so I do think it's certainly the main of the <unk>.

Eric: And so that is core reinsurance, you know, data and analytics, structuring, global access to capital, to a whole new sector of potential clients. And so I do think it's certainly the heart of the business when you used to be serving insurance companies. But there is opportunity outside of that space to drive new growth for us in what you would consider core reinsurance capability. So that, and you think about FAC, you think about investment banking, you know, ILS markets, and being able to use that capital for corporates. And so it's a very creative group that is well coordinated with our commercial risk clients in the risk capital framework.

<unk> continues to be served insurance companies, but there is opportunity outside of that space to drive new growth for us in what you would consider core reinsurance capabilities. So that and you should look think about fast do you think about investment banking.

Speaker Change: S markets and being able to use that capital for corporates and so it's a very creative group that is well coordinated with our commercial risk clients in diverse capital framework and so we do see opportunities for continued growth in that space.

Eric: And so we do see opportunities for continued growth in that space over the coming period. I would add, Elyse, though, that the momentum of this team in the core space of reinsurance, but more broadly across risk capital, has been tremendous. And obviously, the quarter-by-quarter view is helpful, but we look at the annual view.

Speaker Change: Over the coming period.

Speaker Change: I wouldn't.

Speaker Change: At least though the momentum of this team in the core space of reinsurance, but more broadly across risk capital has been tremendous and obviously the quarter by quarter view is helpful. But we look at the annual view, if you think about kind of 10% for the year, that's what's really.

Greg: If you think about kind of 10% for the year, that's really unique, not saying where we're going to be next year other than, you know, mid-single-user or greater across the solution lines, which is what we aspire to. And so I think you could take away from what you've just heard on commercial risk, momentum into 2024. And clearly, as you look at reinsurance, momentum into 2024, for all the reasons that Eric has described, in the core solution line, but also in risk capital. Don't lose this.

Speaker Change: Not saying, we're going to be next year other than you know.

Mid single digit or greater across our solution lines, which is what we which we aspire to.

I think you could take away you've just heard on commercial risk momentum into 2024, and clearly as you look at reinsurance momentum into 'twenty 'twenty four for all the reasons that Eric described in the core solution line, but also in risk capital don't lose this this risk capital orientation is a big deal. It is meaningful in terms of sort of what we're doing the same on the human capital.

Greg: This risk capital orientation is a big deal. It is meaningful in terms of sort of what we're doing. Same on the human capital side. The connectivity across reinsurance or commercial risk creates better solutions. Eric's described a couple of them already.

Speaker Change: The connectivity across reinsurance or commercial risk creates better solutions Eric's described a couple of them already and.

Elyse Greenspan: And so for us, you know, we feel good about the momentum going into 2024, based on the work we did, the groundwork we laid in 2023 on risk capital and human capital. Thanks. And then one more, the savings. I know, Christa, you reaffirmed the $100 million for 24. But it doesn't sound like there were any that came through in the fourth quarter.

Speaker Change: So for us.

Speaker Change: Feel good about the momentum going into 'twenty four based on the work we did the groundwork we laid in 'twenty three on risk, California using capital.

Speaker Change: Thanks, and then one more on the savings I know Christy you reaffirmed the 100 million for 'twenty four.

Speaker Change: It doesn't sound like there were any that came through in.

Christa: So I guess we'll start seeing the savings flow through in the first quarter. Is that correct? That's correct, Elyse. Thanks. Our next question is from the line about Meyer Shields with KBW. Please proceed with your question. Thanks.

Speaker Change: In the fourth quarter, So I guess, we'll start seeing the savings.

Speaker Change: Flow through in the first quarter is that correct.

Christy: That's correct delays.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Meyer Shields with K VW. Please proceed with your question.

Meyer Shields: So, Greg and Christa, you've been very consistent about the impact of the slow M&A and IPO market on organic growth. I want to take a step back and say, how do you think about the fact that organic growth is so dependent on one segment of the marketplace that you ended up with such differentiated results relative to peers? Is that a concern?

Meyer Shields: So Greg and because you've been very consistent about the impact of a slow M&A and IPO market on organic growth I wanted to take a step back and say.

Meyer Shields: How do you think about the fact that organic growth is so dependent on one segment of the marketplace that you ended up with less differentiated results relative to peers is that a concern.

Greg: Well, if you step back, Meyer, I just would step back and say, look at the overall performance of the firm year over year. In essence, we are up for the year, 6% last year, 7% this year across the firm. We think about commercial risk, again, we were 4% in Q4 last year; we're 4% in Q4 this year, even against a substantial headwind we've described. And what we want you to understand in the context of that is, imagine all the things that sort of went behind that, that created that momentum in Q4 and in now 2024 on the commercial risk piece; we've overcome that, and maintained what we were last year. So we're, we're, we're very optimistic about the momentum in 2024. This category is substantial in M&A, and we love it. And we are disproportionately good at it. We're unbelievably good at it from a client leadership standpoint. And so you know, we don't, we don't feel bad about that in the least; we love it, and we're going to double down on it.

Greg: Well, if you step back tomorrow.

Greg: Step back and say look at the overall performance of a firm year.

Greg: Over here.

Greg: Since.

Greg: We are up for the year, 6% last year, 7%. This year across the firm we think about commercial risk again were 4% in Q4 last year with 4% in Q4 this year even against a substantial headwind we've described.

Greg: And what we want you to understand in the context of that is imagine all of the things that sort of math behind that created that momentum in Q4 and in our 2024 and the commercial which piece, we've overcome that and maintain where we were last year. So we're.

Greg: We're very optimistic about the momentum into 2020 for this category is substantial.

Greg: And M&A and we love it and we are disproportionately good at we're unbelievably good at it from a from a client leadership standpoint, and so you know we don't we.

Greg: We don't feel bad about that in the least we love it and we're going to double down on it but we also continue to build out other platforms. You know this year has given us the opportunity to really think that through and really leverage the risk capital orientation.

Greg: But we also continue to build out other platforms. You know, this year has given us an opportunity to really think that through and really leverage the, you know, the risk capital orientation. I would highlight, I mentioned it in my comments, the property symposium, we got 1000 clients and markets in the room, and we brought up the property risk analyzer.

Greg: I would highlight I mentioned it in my comments the property Symposium, we got a thousand clients and markets in the room and we bring up the property risk analyzer and this is really a function of reinsurance and commercial risk analytics and the power of that in the minds of a client were substantial and so now we've got a suite of capabilities that are going on.

Eric: And this is really a function of reinsurance and commercial risk analytics. And the power of that, in the minds of a client, is substantial. And so now we've got a suite of capabilities that are going to contribute to commercial risk and reinsurance, as we move forward. So from our standpoint, what would you really like to take away, and certainly our feeling and commitment is mid single-digit or greater, the translation into OI margin improvement, and, as Krista described, the translation into double-digit free cash flow growth. We have never had more conviction about each of those three categories and are delivering on those, and will continue to deliver on those.

Greg: Contribute to the commercial risks and the reinsurance as we head into 'twenty 'twenty four it so from our standpoint, what would you really like you to take away and it certainly are our feeling and commitment is mid single digit or greater the translation into into Oi margin improvement and as Christa described the translation of the double digit free cash flow growth.

Greg: We have had never had more conviction about each of those three categories and our delivery knows on will continue to deliver those and and the addition of NXP is only going to strengthen our free cash flow profile over time, so for us we.

Greg: And the addition of NFP is only going to strengthen our free cash flow profile over time. So for us, we're always going to be cautious in our approach, but resolute, and we feel very good about the momentum going into 2024. Okay, that's very helpful.

Greg: We're always going to be cautious.

Greg: Cautious in our approach, but resolute and we feel very good about the momentum going into 'twenty 'twenty four.

Greg: Yeah.

Speaker Change: Okay. That's very helpful. Thank you.

Meyer Shields: Thank you. Second question, when we look at the strong organic growth in reinsurance, looking at the breakdown, I think you talked about crudity, facultative, and investment banking. Is that component of revenues positive or negative for the overall market? So, reinsurance is a similar margin business to all of our businesses, which is why we operate AON as one segment, Meyer, and one of the things we would say, part of our AON United strategy, is that we are bringing together a lot of the back office technology, operations, and shared service functions into AON Business Services, which is enabling our focus on common and shared operations And so, we're really operating more and more like a firm in one segment with risk capital, human capital, enterprise clients, and AON Business Services. And Meyer, this is worth a, this is really a great question and really worth a point of high.

Speaker Change: Second question when we look at the strong organic growth in reinsurance looking.

Speaker Change: Looking at the breakdown I think you talked about treaty facultative and investment banking.

Speaker Change: Is that components of revenues are positive or negative to overall margins.

Speaker Change: So again reinsurance is a similar margin business to all of our businesses, which is why we operate aon as one segment.

Speaker Change: And one of the things, we would say part of our Aon United strategy is we are bringing together a lot of the back office technology operations and shared service functions into Aon business services, which is enabling a focus on common and shared operations.

<unk> technology platforms at scale, and then product innovation at scale, and so were really operating more and more of a fun in one segment with risk capital human capital Enterprise client in Aon business services.

Speaker Change: And Mike. This is worth this is really a great question and really worth a point or a high emphasis on.

Christa: This connectivity that Christa was describing, risk capital, human capital, connected through the enterprise client, delivered and amplified by AON Business Services, is a big deal. Our ability to continue to drive margin improvement, as we did this year with lots of investments into the business, is strong. And the exciting piece is this connectivity to AON Business Services, 15,000 colleagues working this closely integrated into the business, not just continued margin improvement, which you saw, but also the capability to really create outcomes that really drive client innovation options that they didn't have before, as well as service enhancements they didn't have before. And so these pieces all come together to sort of create this integrated view, which really gives us great confidence around not only top line growth, but also margin Okay, fantastic.

Speaker Change: This connectivity that Christa described and risk capital human capital connect with true enterprise client delivered an.

Speaker Change: And amplified by Aon business services, a big deal our ability to continue to drive margin improvement as we did this year with lots of investments into the business is high.

The exciting pieces as connectivity on air business services 15000 colleagues working this interconnected into the business is not just continued margin improvement, which you saw but also the capability to really create outcomes that really drive client innovation options that they didn't have before.

Speaker Change: Well as service enhancements, we didn't have before and so these pieces all come together to sort of create this integrated cube, which really give us great confidence around not only top line growth, but also margin improvement and the implications on free cash flow.

Speaker Change: Okay fantastic. Thank you so much.

Greg: Thank you. Our next question is from the line of Charlie Lederer with Citi. Please proceed with your question. Hey, thanks. Good morning.

Speaker Change: Okay.

Speaker Change: Our next question is from the line of Charlie <unk> with Citi. Please proceed with your question.

Charlie: Hey, Thanks, good morning.

Charlie Lederer: I guess my first question is, as we've seen some reserving issues in casualty and financial lines across the industry, wondering if this were to become a more widespread issue for the industry, could that impact AON's profit commissions? And is that material enough that it would impact your margins or organic growth near term? So I'll say we don't do profit commissions, so that's not true for us.

Charlie: I guess first question as we've seen some reserving issues in casualty and financial lines across the industry I'm wondering if if if this were to become a more widespread issue for the industry could that impact and profit commissions and is that material enough that it would impact your margins or organic growth near term.

Speaker Change: So also we don't do the profit Commission, so that's true for us and.

Eric: So that's not in our portfolio. But I would say, in terms of what's happening in that marketplace, I do think it does reflect some pressure that the insurers are seeing, especially on the casualty side. I would say on the financial side, it's probably more a question of just supply and demand where a lot to the market has come. You know, you're just seeing price competition versus any prior loss problems. But I think the casualty piece with medical inflation, they call it social inflation, is affecting their prior reserves.

Speaker Change: So that's not.

And our portfolio.

Speaker Change: But I would say in terms of what's happening in that marketplace. I do think it does reflect some pressure that the insurers are seeing especially on the casualty side I would say on a financial line side, it's probably more a question of just supply and demand where a lot of the new job.

Speaker Change: To the market as company.

Speaker Change: Yeah.

Speaker Change: You're just seeing price competition versus any prior loss problems, but I think the casualty piece with medical inflation.

Speaker Change: They call it social inflation.

Speaker Change: It was affecting their prior reserves, so but it will not have an impact on us from that perspective.

Eric: So but but it will not have an impact on us from that. Got it. Thanks. And then on the commercial risk segment, just wondering, as you know, deal volumes come back eventually, does that carry a higher margin where that would, you know, help your margins as that becomes a larger proportion of the mix again? Again, I would just reinforce the point Charlie around sort of, as Christa described, overall margin ability to sort of drive margin across the firm. You know, we've got a very long track record of being able to do that over the last decade plus, and we have enhanced our ability to do that with AON Business Services. And so we are excited about adding growth as it also helps us deliver on margin. But you don't see us really make that trade off. We really do both.

Speaker Change: Got it thanks, and then I'm the commercial risk segment.

Speaker Change: Just wondering as you know.

Speaker Change: Deal volumes come back eventually.

Speaker Change: Does that carry a higher margin him where that would have helped your margins as that becomes a larger proportion of the Mexican.

Speaker Change: Again, I would just reinforce the point Charlie around sort of as Christa described overall margin our ability to sort of drive margin across the firm. We've got a very long track record of being able to do that over the last decade plus.

Speaker Change: And we have enhanced our ability to do that with Aon business services.

Speaker Change: So we are excited about adding growth as it also helps us deliver on our margin.

Speaker Change: You don't see us really make that trade off.

Speaker Change: We really do both and the profile is ahead of us do exactly that and we would absolutely see as.

Greg: And the profiles ahead of us do exactly that. And we absolutely see, as our three by three plan fits together, that M&A is going to be, and IPOs are going to be a fundamental part of that. And we're excited to have that growth come back. Got it, thank you.

Speaker Change: Our pre buy three plan fits together, but.

Speaker Change: M&A is going to be and.

IPO is gonna be a fundamental part of that and we're excited to have that growth come back.

Speaker Change: Got it thank you guys.

Charlie Lederer: Thank you. Our last question comes from the line of Jimmy Bhullar with JPMorgan. Please receive your question. Hey, thanks.

Speaker Change: Thank you.

Speaker Change: Our last question comes from the line of Jimmy <unk> with J P. Morgan. Please proceed with your question.

Jimmy S. Bhullar: I just wanted to follow up on your comments around the expected timing of the close of the NFP deal. Is mid 2025 what you realistically think the deal will close? Or is it just more, given the uncertainty, you don't want to overpromise?

Jimmy S. Bhullar: I just wanted to follow up on your comments around the expected timing of the close of the NFC deal is mid 2025, what you realistically think the deal will close or is it just more given the uncertainty you don't want to over promise because it seems like it's a long lead time.

Christa: Because it seems like it's a long lead time for a deal that, in my view, doesn't entail a lot of antitrust or other issues given the market focus of NFP. But, Thanks so much for the question. And we agree. We operate in very different segments with very limited overlap. And we fully expect to close in mid-24. However, we have modelled the deal very conservatively with a mid-25 close. And that is us being conservative financially.

For a deal that really in my view doesn't entail a lot of antitrust or other issues given the market focus of MSP, but.

Speaker Change: Thanks, So much for the question and we agree we operate in very different segments with very limited overlap and we fully expect to close in mid 'twenty four.

We have.

Speaker Change: Modeled the deal very conservatively with a mid 25 months.

Speaker Change: That is all staying conservative financially.

Christa: Okay, but in terms of and then in terms of sort of processes, are there areas where there is some overlap that we can't see from the outside? Or do you not think there's going to be anything related to potential dispositions in order to get the deal approved? So, AON and NFP operate in highly competitive markets, and most importantly, the purpose of this transaction is to grow AON's presence in the fast-growing middle market segment. And so we do not see overlap, and we, again, expect the deal to close in mid-24. Thank you. I would like to turn the call back over to Greg Case for his closing remarks. Thanks very much.

Speaker Change: Okay, but in terms of and then in terms of sort of processes are there areas there.

Speaker Change: There is some overlap and we can see from the outside or do you not think there's going to be anything related to potential dispositions.

Speaker Change: In order to get the deal approved.

Speaker Change: So I own an NFPA upright and highly competitive market and most importantly, the purpose of this transaction is to grow our presence in the fast growing middle market segment.

Speaker Change: So we do not see Ah Ah Ah.

Speaker Change: And we again expect the deals closed mid 'twenty four okay. Thank you.

Yeah.

Speaker Change: Thank you.

Gregory C. Case: I don't know that I'd like to turn the call back over to Greg case for closing remarks.

Greg: Thanks, very much I would like to add a couple of thoughts since we closed the day just picking up the Aragon crystal and some of the comments that have been made throughout the call which has been very very helpful. Just iterate a couple of things first reflect on the long track record we've had delivering on the strategic initiatives.

Greg: I would like to add a couple of thoughts as we close today. Just picking up, Eric and Christa, on some of the comments that have been made throughout the call, which have been very, very helpful. I just want to reiterate a couple of things.

Greg: First, reflect on the long track record we've had delivering on strategic initiatives and external commitments. And think about it being included in a number of significant acquisitions and divestitures and a history of successfully executing around restructuring programs. And that brings us to where we are today, which you can tell from our enthusiasm; we're very excited about. Think about the three by three plan.

Greg: External commitments and think about it has included a number of significant acquisitions and divestitures and a history of successfully executing around the restructuring programs and that brings us to where we are today, which you can tell from our enthusiasm we're very excited about it.

Greg: You think about the three by three plants each component of our strategy and the execution plan here are fully aligned totally connected to thinking about Eric described to de risk capital and human capital and that capability as it comes together with that the client response to this has been exceptional.

Greg: Each component of our strategy and the execution plan here is fully aligned, totally connected. You think about what Eric described today, risk capital and human capital, and the capability that comes together with that. The client response to this has been exceptional. As we continue to build that, it's now connected completely through our ability to deliver it to the field, enterprise clients, and the young client leadership model, fully connected. And then this amplification on AM business services came up a few times today. We'd encourage you to really dig in and understand the power of what this really means. 15,000 colleagues in this group, well beyond the efficiency that Christa described, which you saw in the 23 OI margin of 31.6. It's really the ability to deliver better content and a better service experience.

As we continue to build that it's now connected completely through our ability to deliver it out into the field enterprise clients and the young client leadership model fully connected and then this amplification on Aon business services came up a few times today, we would encourage you to really dig in and understand the power of what this really means 15000 colleagues in this group well beyond the efficiency that Christa.

Greg: Rod.

Greg: On the 23 Oi margin of 31 six.

Greg: It's really the ability to deliver better content and a better service experience that combination really is extremely exciting for us in terms of what it means for aon for our clients and as Eric described it really you think about sort of NSP opportunity in an ERP is there because of their great capability and awesome operating platform and our Aon business services.

Greg: That combination really is extremely exciting for us in terms of what it means for our clients. And as Eric described, it really, I think about sort of NFP, the opportunity in NFP is there because of their great capability and awesome operating platform and our AM business services capability. And again, we bring all that together with a $900 million investment to accelerate that, do that over three years across the three by three plan, and compare it to what it would take over more time.

Greg: Capability and again, we bring all that together with the $900 million investment to accelerate that and do that over three years across the three by three plan with what we were thinking more time. So I just wanted to highlight as the questions come together really connected in our mind and really put us in a unique position to execute against our overall plan and deliver great momentum in 'twenty four.

Greg: So I just want to highlight that as the questions come together, they're really connected in our minds and really put us in a unique position to execute against our overall plan and deliver great momentum on 24, 25, and 26. So I just want to end with that summary and say thanks to everyone for being part of the call today and look forward to our discussion next time. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Greg: 25, and 26, so this one and without summary, and say thanks to everyone for being part of the call today and look forward to our discussion next time.

Speaker Change: Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.