Q2 2025 Aon PLC Earnings Call
Unknown Executive: holding PLC's second quarter 2025 conference call.
Good morning and thank you for holding.
Unknown Executive: At this time, all parties will be in a listen only mode until the question and answer portion of today's call.
Unknown Executive: I would also like to remind all parties that this call is being recorded. If anyone has an objection, you may disconnect your line at this time.
Unknown Executive: It is important to note that some of the comments in today's call may constitute certain statements that are forward-looking in nature, as defined by the Private Securities Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated.
Speaker Change: PLC second quarter 2025 conference call. At this time, all parties will be in a listen-only mode until the question and answer portion of today's call. I would also like to remind all parties that this call is being recorded. If anyone has an objection, you may disconnect your line at this time.
Speaker Change: It is important to note that some of the comments in today's call May constitute certain statements.
Unknown Executive: For information concerning these risk factors, please refer to our earnings release for this quarter and to our most recent quarterly or annual SEC filing, all of which are available on our website.
That are forward-looking in nature as defined by the private Securities Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to different materially from historical results or those anticipated.
Unknown Executive: It is now my pleasure to turn the call over to Greg Case, CEO of Aon PLC. Thank you. Please go ahead. Thank you, Donna.
For information concerning these risk factors, please refer to our earnings release for this quarter and to our most recent quarterly or annual SEC filing, all of which are available on our website. It is now my pleasure to turn the call over to Greg kase CEO of Aon PLC. Thank you, please go ahead.
Gregory Case: Good morning, and welcome to our second quarter earnings call.
Gregory Case: I'm joined today by Edmund Reese, our CFO. And as always, we posted a detailed financial presentation on our website, which Edmund will reference in his remark. To begin, we want to take a moment to reflect on the momentum coming out of our investor day, where we detailed why and how our client centric and united strategy drives sustainable top line growth and exceptional free cash flow per share growth. Aon United, operationalized and accelerated by the 3x3 plan, is driving meaningful performance, demonstrated in our Q2 results, with continued momentum as we enter the second half of 2025 and look ahead to 2026.
Greg Kase: Thank you, Donna, good morning and Welcome to our second quarter earnings call. I'm joined today by Edmund Reese, our CFO. And as always we posted a detailed Financial presentation on our website, which Edmund will reference in his remarks.
Greg Kase: To begin. We want to take a moment to reflect on the momentum coming out of our investor day where we detailed why, and how our client Centric a and United strategy drives sustainable Topline growth and exceptional, free cash flow per share growth.
Greg Kase: A on United, operationalized and accelerated by the 3x3.com.
Gregory Case: Let's start with some Q2 highlights. We delivered a strong quarter in line with our expectations. including 6% organic revenue growth, 19% adjusted EPS growth, and 59% free cash flow growth. clients facing an increasingly complex operating environment, our work to deliver for them has never been more essential. and we remain confident in our ability to meet their evolving needs both now and over the long term. At Investor Day, we discussed how market realities shaping the current operating landscape are complex and constantly evolving. Clients of all sizes, industries and geographies are challenged with how to address and respond to the interconnected megatrends of trade, technology, weather, and workforce.
Greg Kase: Let's start with some Q2 highlights.
Greg Kase: We delivered a strong quarter in line with our expectations, including 6%, organic Revenue growth, 19% adjusted, EPS, growth and 59%, free cash flow growth.
Greg Kase: For clients facing an increasingly complex, operating environment our work to deliver for them has never been more essential.
Greg Kase: And we've remained confident in our ability to meet the revolving needs both now and over the long term.
Greg Kase: that is yesterday, we discussed how Market reality shaping, the current operating landscape are complex and constantly evolving,
Gregory Case: And the pressure is only growing. In the weeks following Investor Day alone, we've seen several major developments that demonstrate the impact and connectivity of these megatrends. The enactment of U.S. tax legislation and continued shifts in the global tariff landscape. Severe flooding and convective storms across the U.S., alongside record-breaking heat waves in both the U.S. and Europe, events that have driven historic first-half catastrophe losses, disrupted supply chains, displaced workforces, and caused widespread property damage. and significant workforce changes announced by some of the world's largest technology companies. citing the accelerating impact of AI on roles and responsibilities.
Greg Kase: Clients of all sizes Industries and geographies are challenged with how to address and respond to the interconnected Mega trends of trade technology weather and Workforce.
Greg Kase: And the pressure is only growing.
Greg Kase: In the weeks, following investor day alone, we've seen several major developments that demonstrate the impact and connectivity of these Mega trends.
Greg Kase: The enactment of us tax legislation and continued shifts in the global Terror landscape.
Greg Kase: Severe flooding and productive storms across the US, alongside record-breaking heat waves in both the US and Europe events that have driven historic first. Half catastrophe, losses disrupted, Supply chains, displaced workforces and caused widespread property damage.
Gregory Case: These events and many others reinforce the importance of our Anne United strategy as we help clients make better decisions and achieve better outcomes in what is arguably the most complex operating environment they've ever faced. Our strategy is working. As we detailed on Investor Day, the Industrial Strength Foundation powering AON United and driving sustainable top line growth and margin expansion is AON Business Service. With ABS fully operationalized, we're winning more share in core markets. Capturing Demand in Existing Markets. and creating new demand in new category. Let me highlight a few specific examples from the second quarter.
Greg Kase: And significant Workforce changes, announced by some of the world's largest technology companies citing the accelerate impact of AI on roles and responsibilities.
Greg Kase: And what is arguably the most complex operating environment they've ever faced.
Greg Kase: Our strategy.
Is working.
Greg Kase: As we detailed an investor day, the industrial strength Foundation, powering a and United and driving sustainable Topline, growth and margin expansion is a on Business Services.
With abs fully operationalized, we're winning more share in core markets. Capturing demand and existing markets and creating new demand in new categories.
Greg Kase: Let me highlight a few specific examples from the second quarter.
Gregory Case: We are winning more in the core by deepening relationships with existing clients. One of the world's largest investment firms who previously engaged us solely on risk capital topics recently awarded us their U.S. and Global Benefits Advisory Bill. This win was driven by two key factors. First, our integrated risk capital and human capital structure is unique in our industry, and allows clients to employ a holistic risk strategy across their full business Leveraging our scale and analytics, this leading global company could see their business differently across their own internal silo. and second, our differentiated human capital analytics provide globally comparable insights that help them make better data driven decisions.
We are winning more in the core by deepening relationships with with existing clients.
Speaker Change: 1 of the world's largest investment firms. Who previously engaged us solely on risk Capital topics recently? Awarded us their us and Global benefits advisory business.
This win was driven by 2 key factors.
Speaker Change: First our integrated risk capital and human capital structure is unique in our industry and allows clients to employ a holistic risk strategy across their full business.
Speaker Change: Leveraging our scale and analytics. This leading global company could see their business differently across their own, internal silos.
And second are differentiated human capital analytics, provide globally, comparable insights that help them make better data-driven decisions.
Gregory Case: We are also capturing demand in existing markets by developing new capabilities.
Gregory Case: In the second quarter, we launched. Aon Broker Co-Pilot and placed our first client program, a game changer for our brokers, advisors and clients. This capability leverages Aon's global scale, proprietary data, and embedded AI to provide an enhanced view into how the global insurance market is pricing risk. arming our team with insight into real time market behavior. Broker Copilot augments predicted broking, enabling Aon brokers to match capital to risk in an unparalleled manner. and another example of how ABS assets support our colleagues to capture new demand and serve clients with superior solutions. And finally, we're creating new demand in new ways by innovating on behalf of clients in categories like cyber, an expected area to drive outsized growth for Aon as sourcing sufficient and tailored cyber insurance remains a pressing concern for clients.
Speaker Change: We also capturing demand and existing markets by developing new capabilities in the second quarter. We launched
Speaker Change: Aon broker copilot and placed our first client program, a game changer for our Brokers advisors and clients.
Speaker Change: This capability leverages aoins global scale proprietary data and embedded AI to provide an enhanced view into how the global insurance Market is pricing risk.
Speaker Change: Army and our team with insight into real time Market Behavior. Broker co-pilot augments predictive broking enabling aeon Brokers to match Capital to risk in an unparalleled manner.
Speaker Change: And another example with our ABS assets, support our colleagues to capture new demand, and serve clients with Superior Solutions.
Speaker Change: Finally.
Speaker Change: We're creating new demand.
Speaker Change: by innovating our
Speaker Change: categories, like cyber
Gregory Case: In Q2, we developed and placed a first-of-its-kind cyber reinsurance office. Aon Surge Stop Loss, which enables enhanced protection against cumulative cyber loss. Unlike traditional reinsurance products that require a specific event driven event to trigger coverage, Aon Surge Stop Loss triggers based on aggregate loss thresholds, resulting in broader, more flexible protection. an important evolution in the cyber reinsurance market, given the ever increasing risk of cyber attack. We also continue to invest in client facing talent across high growth areas and our revenue generating hires are up 6% through June 30th. Colleagues come to Aon because they recognize the competitive advantage of Aon's differentiated platform and how it enables them to deliver superior client outcomes.
Speaker Change: And expected area to drive outside growth for Aon, as sourcing sufficient and tailored, cyber Insurance remains a pressing concern for clients.
Speaker Change: In Q2 we developed and placed a first-of-its-kind, cyber reinsurance offering.
Speaker Change: Aeon surge stop-loss which enables enhanced protection against cumulative, cyber losses.
Speaker Change: Unlike traditional reinsurance products that require a specific event-driven uh, event to trigger trigger coverage, aeon surge stop-loss triggers based on aggregate loss. Thresholds resulting in broader more flexible protection.
Speaker Change: An important Evolution and the Cyber reinsurance Market given the ever increase in risk of cyber attacks.
Speaker Change: We also continue to invest in client facing Talent across high growth areas.
Speaker Change: And our Revenue generating hires are up 6% through June 30th.
Speaker Change: Colleagues come to Aeon because they recognize the competitive advantage of aoins differentiated platform.
Gregory Case: Finally. The $31 billion North American middle market remains a significant growth opportunity. Our integration of NFP continues to progress very well, and we're making meaningful progress to our $80 million net revenue synergy target for 2025, as our combined team continues to unlock value by leveraging complementary capabilities and deep client relationships. It's clear our AON United strategy powered by ABS continues to drive innovation, deliver actionable insights and match client risk with new sources of capital. Our strong first half performance and continued progress against the commitments of the three by three plan reinforce that we have the right strategy and plan in place to deliver long term value.
Speaker Change: And how it enables them to deliver Superior client outcomes.
Speaker Change: Finally.
Speaker Change: The 31 billion, North American Middle Market remains a significant growth opportunity.
Speaker Change: Our integration of NFP continues to progress very well.
Speaker Change: And we're making meaningful progress to order 80 million, net revenue, Synergy targets for 2025.
Speaker Change: As our combined, team continues to unlock value by leveraging complimentary capabilities, and deep client relationships.
Speaker Change: It's clear. Our a on United strategy powered by ABS continues to drive Innovation deliver actionable, insights, and match client risk with new sources of capital.
Gregory Case: And as a result, we reaffirm our 2025 full year guidance and our commitment to deliver double digit free cash flow growth over the 23 to 26 three by three plan period.
Our strong first half performance and continued, progress, against the commitments of the 3x3.com.
Speaker Change: and as a result,
we reaffirm our 2025 full year guidance and our commitment to deliver double digit. Free cash flow growth over the 23 to 26 3x3.com.
Gregory Case: To conclude, I will highlight three points. First, as the global environment continues to evolve, Aon's capability and integrated solutions are mission critical for clients to mitigate complexity, protect assets and grow their business. Second, our team is confident in our ability to capitalize on the compelling opportunities ahead and deliver long-term shareholder value. And the results today are just another clue point of the strength of our strategy. And third, we have momentum across our business. We are attracting great talent. We are capturing the growing middle market opportunity and we are winning more with both new and existing clients.
Speaker Change: To conclude, I will highlight 3 points.
Speaker Change: First.
Speaker Change: As the global environment continues to evolve, aoins capability and Integrated Solutions are mission critical for clients to mitigate complexity, protect assets and grow their businesses.
Speaker Change: Second.
Speaker Change: Our team is confident in our ability to capitalize on the compelling opportunities ahead and deliver long-term shareholder value.
Speaker Change: And the results today are just another proof point of the strength of our strategy.
Speaker Change: And third, we have momentum across our businesses.
Speaker Change: An existing clients.
Gregory Case: Finally, to our over 60,000 colleagues around the world, thank you. Thank you for your commitment to our clients, each other, and our A.N. United strategy. Your dedication is the driving force of our firm.
Finally.
Speaker Change: To our over 60,000 colleagues around the world.
Speaker Change: Thank you, thank you for your commitment to our clients, each other and our an United strategy. Their dedications, the driving force of our firm.
Edmund Reese: Now I'll turn the call over to Edmund for his thoughts on our financial performance and long-term opportunity to drive shareholder value creation. Edmund, over to you.
Edmund Reese: Thank you, Greg, and good morning, everyone. I'm excited to be here to discuss our second quarter results, which reflect both execution and the growing momentum of our 3x3 plan. Before we get into the details of our second quarter results, I want to take a moment to elevate what matters most.
Now, I'll turn the call over to Edmond for his thoughts on our financial performance and long-term opportunity to drive shareholder value creation, Edmond over to you.
Edmond: Thank you, Greg and good morning everyone.
Edmond: I'm excited to be here to discuss our second quarter results, which reflect both execution and the growing momentum of our 3 by3 plan.
Edmond: And before we get into the details of our second quarter results, I want to take a moment to elevate. What matters most?
Edmund Reese: There are three key proof points that best capture the momentum behind our strategy and the strength of our performance. These highlights provide the right context for the details that follow and underscore how our execution on the 3x3 plan is translating into tangible results. First, we see clear evidence that our financial model is delivering its design. Our investments in revenue-generating hires, equipped with the analytical tools and client experience enhancements enabled by Aon Business Services, or ABS, are translating into sustainable mid-single-digit or greater organic revenue growth. Organic revenue growth was 6% of the quarter, and we are winning new business, expanding our relationships with existing clients, and doing so with greater client engagement.
Edmond: There are 3. Key proof points that best capture the momentum behind our strategy in the strength of our performance.
Edmond: These highlights provide the right context for the details that follow and underscore, how our execution on the 3. By 3 plan is translating in the tangible results.
Edmond: First, we see clear evidence that our financial model is delivering, is designed.
Edmond: our investments in Revenue generating hires,
Equipped with the analytical tools inclined experience enhancements enabled by Aion Business Services or ABS or translating into sustainable. Mid single digit or greater organic Revenue growth.
Edmond: Organic. Revenue growth was 6% for the quarter and we are winning new business.
Edmond: Expanding our relationships with existing clients in doing so with greater client engagement.
Edmund Reese: Second, these Q2 results are not just about top line performance. They reflect our ability to invest in growth and expand margins, not through cost cutting, but through operating leverage. The scaled improvements powered by ABS, along with our restructuring program savings, created capacity to fund growth investment. while still expanding margins by 80 basis points over last year in line with our long-term model. Top Line Strengths Coupled with the Operating Leverage drove 19% adjusted EPS growth year over year, and we converted those earnings into 59% free cashflow growth in the quarter. A clear demonstration of the strength of our earnings power and capital position.
Edmond: Second.
Edmond: These Q2 results are not just about Topline performance.
they reflect our ability to invest in growth and expand margins not through cost cutting, but through operating Leverage
Edmond: The scale improvements powered by ABS along with our restructuring program, savings created capacity to fund growth Investments.
Edmond: While still expanding margins by 80 basis points over the last year in line with our long-term model.
Edmond: Third.
Edmond: The Topline strengths coupled with the operating Leverage.
Edmond: Drove. 19% adjusted, EPS growth year-over-year and we converted those earnings into 59% free cash flow growth in the quarter. A clear demonstration of the strength of our earnings power and capital position.
Edmund Reese: This performance reinforces our conviction in delivering double digit free cash flow growth for the full year. and it gives us the flexibility to execute across all dimensions of our capital allocation strategy. We remain on track to meet our leverage objective, continue our disciplined middle market M&A strategy, and return $1 billion in capital to shareholders via share repurchases this year.
This performance, reinforces our conviction in delivering, double-digit free cash flow growth for the full year.
Edmond: And it gives us the flexibility to execute across all dimensions of our Capital, allocation strategy.
We remain on track to meet our leverage objective. Continue our discipline, Middle Market m&a strategy and return, 1 billion in capital to shareholders via share, repurchases, this year.
Edmund Reese: Taken together, our first half performance. 5% organic revenue growth and 8% adjusted EPS growth reflects the strength and resilience of our business and financial model. and the discipline of our execution. In a macro environment that remains uncertain, we are delivering results by deepening client relationships and creating more value for clients through data insights and innovative capital solutions. We are driving growth through our investments and data capabilities, expanding margins through ABF. and converting earnings into strong free cash flow. This gives us confidence in achieving a full year 2025 guideline.
Edmond: Taking together. Our first half performance.
Edmond: 5% organic Revenue growth and 8% adjusted EPS, growth, reflects the strength and resilience of our business and financial model.
and the disciplines of our execution,
Edmond: in a macro environment that remains uncertain, we are delivering results by deepening client relationships and creating more value for clients through Data Insights and Innovative Capital Solutions.
Edmond: We are driving growth through our investments and data capabilities expanding margins through abs.
Edmond: And converting earnings into strong free cash flow.
Edmund Reese: So now turning to the second quarter results in the financial summary on slide five. You see that we delivered 6% organic revenue growth in the second quarter and total revenue increased 11% to $4.2 billion. Adjusted operating margin was 28.2% up 80 basis points for the quarter in line with our expectations. And this includes the impact from NFP as we lap the anniversary of the acquisition at the end of April, resulting in a more normalized margin profile going forward. Adjusted EPS was $3.49. And finally, free cash flow increased to $732 million, reflecting strong adjusted operating income growth and continued improvement in day sales outstanding.
This gives us confidence in achieving our full year, 2025 guidance.
Edmond: so, now, turning to the second quarter results, in the financial summary on slide 5,
You see that we delivered 6%. Organic Revenue growth in the second quarter and total revenue increased 11% to 4.2 billion.
Adjusted operating margin was 28.2% up. 80 basis points for the quarter in line with our expectations and this includes the impact from NFP as we lack the anniversary of the acquisition at the end of April resulting in a more normalized margin profile going forward.
Adjusted EPS was $3.49 and finally free cash flow increased to 732 million reflecting strong, adjusted operating income growth.
Edmond: And continued improvements in Day sales outstanding.
Edmund Reese: Let's get into the details of these results, starting with organic revenue growth on slide six. Organic Revenue Growth in Q225 was in line with our mid-single-digit or greater guidance range. Growth was broad based with three of our four solution lines, commercial risk, reinsurance and health, each delivering 6% organic revenue growth, reflecting strong new business performance and high retention. and Commercial Risk. The 6% organic revenue growth in Q2 reflected strong performance in our core PNC business. with meaningful contributions from both North America and America. as well as strengthen M&A services relative to prior year and double-digit growth in construction.
Let's get into the details of these results. Starting with Organic Revenue growth on slide 6.
Edmond: New growth in Q2 25 within line with our mid single digit or greater guidance range.
Edmond: growth was broad-based with 3 of our 4 solution, lines, commercial risk, reinsurance and health each delivering 6%, organic Revenue growth,
Edmond: Reflecting strong new business performance and higher retention.
Edmond: In commercial risk to 6% organic Revenue growth in Q2 reflected strong performance in our core PNC business.
Edmond: With meaningful contributions from both North America and Amia.
As well as strengthened m&a Services relative to Prior year.
Edmund Reese: Notably, construction and renewable energy projects remain key areas of focus for us, with activity levels continuing to be robust. And reinsurance organic revenue growth was 6% driven by double digit growth in our insurance linked securities business, where we continue to lead the market in cap bond placements, now totaling $50 billion outstanding. We saw double-digit growth in facultative placements in EMEA and Asia Pacific, which helped offset softer April 1 property renewals where rates declined 5 to 20 percent. Looking ahead, we continue to expect full-year organic revenue growth in line with our mid-single-digit or greater objective. supported by higher limits at July 1 renewals.
Edmond: And double-digit growth in construction.
Edmond: Notably construction and renewable energy projects, remain key areas of focus for us with activity levels, continuing to be robust.
Edmond: And reinsurance organic Revenue growth. Was 6% driven by double digit growth in our insurance link Securities business, where we continue to lead the market in Catman placements. Now totaling 50 billion outstanding,
Edmond: We saw double digit growth in facultative placements. In the Mia, in Asia Pacific, which helped offset, softer April, 1 property, renewals were rates. Declined 5 to 20%.
Looking ahead, we continue to expect full year organic Revenue growth in line with our mid single digit or greater objective.
Edmund Reese: Continued momentum in international facultative placements and strong demand for analytics from our strategy and technology. Health Solutions also delivered 6% growth in the quarter and benefited from continued strength in our core health and benefits business. especially across international markets. Growth was fueled by net new business and market dynamics that continue to drive rising healthcare. We also saw a strong contribution from NFP, most notably in executive benefits and pharmacy solutions where demand remains elevated. And finally, wealth generated 3% organic revenue growth on top of 9% growth in the prior year period. The performance this quarter was driven by regulatory work across the UK and EMEA.
Edmond: Supported by higher limits at July 1 renewal.
Continued momentum in international, facultative, placements. And strong demand for analytics from our strategy and Technology Group.
Health Solutions. Also delivered 6% growth in the quarter and benefited from continued strength in our core health and benefits business.
Edmond: Especially across International markets.
Edmond: growth was fueled by net new business in market dynamics, that continue to drive Rising health, care costs
Edmond: We also saw a strong contribution from NFP most notably in the executive benefits and Pharmacy Solutions where demand remains elevated.
Edmond: And finally wealth generated 3%, organic Revenue growth on top of 9% growth in the prior year period.
Edmund Reese: We also saw a meaningful contribution from NFT asset inflows and market performance.
The performance. This quarter was driven by regulatory work across the UK and the Mia.
Edmond: We also saw a meaningful contribution from NFP asset inflows and market performance.
Edmund Reese: So let me take a moment now to walk through the components of our Q2 Organic Revenue Growth on slide 7. As I shared on Investor Day, Aon has a consistent track record of generating new business. and that continued in Q2. In the quarter, new business powered organic revenue growth and contributed 11 points. with an equal contribution from both new clients and expansion with existing clients. Our investments in revenue-generating talent in high-growth areas like construction and energy are delivering measurable impact. Revenue generating headcount is up 6% through the first half, and these colleagues are equipped with advanced data analytics and capabilities from ABS, enabling them to win more business.
Edmond: So let me take a moment. Now to walk through the components of our Q2 organic, Revenue growth on slide 7,
Edmond: As I share that, investor day, Aion has a consistent track record of generating new business.
And that continues in Q2.
Edmond: in the quarter, new business, powered organic Revenue, growth and contributed 11 points with an equal contribution, from both new clients,
Edmond: And expansion with existing clients.
Edmond: Our investments in Revenue, generating talent and high growth areas like construction and energy are delivering measurable impact.
Edmond: Revenue generating headcount is up 6% to the first half and these colleagues are equipped with Advanced data analytics and capabilities from abs.
Edmund Reese: We continue to expect these investments to support sustainable organic revenue growth with the 2024 cohort projected to contribute 30 to 35 basis points to full year organic revenue growth. S225 retention improved by one point year over year, driven by continued gains in commercial risk as we expand enterprise client leader coverage and deploy our risk capital analytics. Net new business contributed five points to organic revenue growth in the Net market impact, which captures the impact of rate and exposure, contributed approximately one point to organic revenue growth, consistent with our zero to two point estimated rate. Reinsurance was down from rate declines and higher retention.
Edmond: Enabling them to win more business.
We continue to expect these Investments to support sustainable organic Revenue growth with the 2024 cohort. Projected to contribute 30 to 35 basis points, to full year, organic Revenue growth,
Edmond: Q2 25 retention improved by 1.0 year-over-year driven by continued, gains in commercial risk, as we expand Enterprise client leader coverage and deploy our risk Capital analyzer.
Edmond: Net, new business contributed 5 Points to organic Revenue growth in the quarter.
Edmond: Net Market impact, which captures the impact of rate and exposure contributed approximately. 1 point to organic Revenue growth consistent with our zero to 2 point estimated range.
Edmund Reese: and great pressure in commercial risk was offset with limit and coverage increases across our Health and Wealth both benefited from positive net market impact with rising health care costs and favorable asset performance supporting growth.
Edmond: Reinsurance was down from rate declines and higher retention.
Edmond: And rate pressure in commercial risk, was all set with limits and coverage increases across our book.
Edmund Reese: And one final point on revenue. Second quarter fiduciary investment income was $66 million in the quarter, down 12% versus the prior year. Well, average balances increased lower interest rates more than offset that benefit.
Edmond: Health and wealth both benefited from positive net Market impact, with Rising health care costs and favorable asset performance supporting growth.
Second quarter fiduciary investment income was 66 million in the quarter down 12% versus the prior year.
Edmond: Well, average balances increase lower interest rates more than offset that benefit.
Edmund Reese: On slide 8, Adjusted Operating Income was up 14% year over year to $1.2 billion, and Adjusted Operating Margin was up 80 basis points to 28.2%. This margin expansion reflects the impact of the four components that we highlighted when we provided full year. and a P. Ducieri Investment Income, Restructuring and Operating Leverage, all of which are in line with our expectations. While we absorbed a one month margin headwind from NFP given the April 2024 closing. Our margin continued to benefit from the scale improvement driven by ABS and the savings from our restructuring program. Specifically, restructuring savings totaled $35 million in the quarter, contributing approximately 83 basis points to adjusted operating margins.
Edmond: On slide 8, adjusted operating income was up 14% year-over-year to 1.2 billion and adjusted operating margin was up. 80 basis points to 28.2%.
Edmond: This margin expansion, reflects the impact of the 4 components that we highlighted when we provided full year, guidance and FP.
Edmond: Fiduciary investment income restructuring and operating leverage all of which are in line with our expectations.
Edmond: We absorbed a 1-month margin headwind from NFP, given the April 2024 closing.
Edmond: Our margin continued to benefit from the scale Improvement driven by ABS and the savings from our restructuring program.
Edmond: Specifically, restructuring savings totaled, 35 million in the quarter contributing approximately 83 basis points to adjusted operating margin.
Edmund Reese: We remain on track to deliver $150 million in restructuring savings for the full year and are progressing well toward our goal of $350 million in run rate savings by 2026. Given our strong progress in the first half of the year, we remain confident. and our ability to drive full-year adjusted operating margin expansion of 80 to 90 basis points consistent with our long-term model.
Edmond: We remain on track to deliver 150 million in restructuring savings for the full year and our progressing. Well, toward our goals of 350 million and run rate savings by 2026.
Edmond: Given our strong progress in the first half of the year, we remain confident in our ability to drive full year. Adjusted operating margin expansion of 80 to 90 basis points consistent with our long-term model.
Edmund Reese: Moving to interest other income and taxes on slide nine. As we indicated last quarter interest income was negligible in the second quarter and $31 million lower than last year when we earned interest on funds held ahead of the NFP acquisition. Interest expense of $212 million was lower by $13 million versus the prior year, primarily due to lower average debt balance. We expect interest expense to be approximately $210 million in Q3 2021. Other expenses rose by $17 million year over year to $32 million, primarily due to the remeasurement of balance sheet items in non-functional currencies and higher non-cash pension For more information visit www.FEMA.gov We estimate Q3 25 other expense to range between $25 million and $32 million.
Edmond: Moving the interests of their income and taxes on slide 9.
As we indicated last quarter, interest income was negligible in the second quarter and 31 million lower than last year, when we earned interest on funds held ahead of the NFP acquisition.
Edmond: Interest expense of 212 million was lower by 13 million versus the prior year.
Edmond: Primarily due to the lower average debt balances.
Edmond: We expect interest expense to be approximately 210 million in q3.25.
Edmond: Other expense Rose by 17 million year-over-year to 32 million, primarily due to the remeasurement of balance sheet items in non-functional currencies.
Edmond: And hired non-cash pension expense.
Edmond: We estimate Q3 255, other expense to range between 25 million and 32 million?
Edmund Reese: And finally, the Q2 tax rate was $16.5. reflecting a favorable impact related to discrete items. While we expect variability in the quarterly rate, our year-to-date rate of 19.3% is in line with our expectations and our full-year tax outlook remains unchanged at 19.5% to 20.5%.
Edmond: And finally, the Q2 tax rate was 16.5% reflecting a favorable impact related to discrete items.
Edmond: While we expect variability in the quarterly rate, our year-to-date rate of 19.3% is in line with our expectations and our full year. Tax Outlook remains unchanged at 19.5% to 20.5%.
Edmund Reese: Turning now to free cash flow on slide 10. We generated $732 million in free cash flow in the second quarter, up 59% year-over-year. On a year-to-date basis, free cash flow is up 13% and this growth reflects strong adjusted operating income, including contributions from NFP and continued improvements in day sales outstanding. This free cash flow performance gives us the flexibility to execute across all dimensions of our capital allocation strategy. and we continue to expect double digit free cash flow growth in 2025.
Edmond: turning now in the free cash flow on slide 10,
We generated 732 million in free cash flow in the second quarter up 59% year-over-year.
Edmond: On a year-to-date basis, free cash. Flows up 13% and this growth reflects strong adjusted operating income including contributions from NFP.
Edmond: And continued improvements in Day sales outstanding.
Edmond: This free cash flow. Performance gives us the flexibility to execute across all dimensions of our Capital, allocation strategy, and we continue to expect double digit free cash, flow growth in 2025
Edmund Reese: Turning the capital allocation on the right side of the page, we remain focused on executing our disciplined and balanced capital allocation. We continue to make progress on deleveraging, lowering our leverage ratio to 3.4 times in a second. We remain on track to achieve our target range of 2.8 times to 3.0 times by the fourth quarter of 2025, consistent with the objective we set when we announced the NFP acquisition. We also remained active in M&A, continuing our targeted tuck-in acquisitions across priority areas, including middle market deals through NFP. Through June, NFPs closed eight acquisitions, representing 20 million of EBITDA, with 80% of the EBITDA connected to PNC deals.
Edmond: Turning the capital allocation on the right side of the page. We remain focused on executing, our disciplined and balanced Capital. Allocation
Edmond: We continued to make progress on deleveraging lowering, our leverage ratio to 3.4 times in the second quarter.
Edmond: we remain on track to achieve our target range of 2.8 times the 3.0 Times by the fourth quarter of 2025 consistent with the objective, we set, when we announced the NFP acquisition,
Edmond: We also remained active in m&a. Continuing our targeted, tuck-in Acquisitions across priority areas including Middle Market deals through NFP.
Edmond: Through June nfps, closed 8 Acqua with 80% of the IBA connected to PNC deals.
Edmund Reese: Finally, we returned $411 million in capital to shareholders this quarter through the dividend and $250 million in share repurchase. Keeping us on track for $1 billion in capital return through share repurchases for the full year. each of these acts. underpinned by strong free cash flow generation, reflects our disciplined capital allocation model in action. Investing in high return growth. and Returning Capital to Shareholders.
Edmond: Finally we returned 411 million in capital to shareholders this quarter through the dividend and 250 million in share repurchases, keeping us on track for 1 billion in capital return through share repurchases for the full year.
Edmond: Each of these actions.
Edmond: Underpinned by strong free cash flow generation. Reflects our discipline Capital, allocation model in action.
Edmond: Reducing Leverage.
Edmond: Investing in high returned growth.
Edmund Reese: So I'll conclude my prepared remarks on slide 11 with some thoughts on our financial objectives in 2025 guidance. Our second quarter results and our performance through the first half of 2025 reflect the strength of our financial model and our execution on our 3x3 plan. We are delivering sustainable organic revenue growth by investing in the capabilities that fuel Client Facing Talent, Differentiated Analytics, and Seamless Client Experience through ABS. Our Organic Revenue Growth combined with the initiatives we're executing across ADF. Standardized Operations and Integrate Platforms is creating capacity to fund our growth investments while strengthening the foundation for ongoing margin expansion.
Edmond: And returning Capital to shareholders.
Edmond: So, I'll conclude my prepared remarks on slides 11 with some thoughts on our financial objectives in 2025 guidance.
Edmond: Our second quarter results in our performance, through the first half of 2025, reflect the strength of our financial model and our execution on our 3 by 3.
Plan. We are delivering sustainable organic Revenue growth by investing in the capabilities that fuel growth.
Edmond: Clients facing Talent.
Edmond: Differentiated analytics and seamless client experience through abs.
Edmond: Our organic Revenue growth combined with the initiatives. We are executing across abs.
Edmond: The standardized operations and integrate platforms is creating capacity to fund our growth Investments?
Edmond: While strengthening the foundation for ongoing margin expansion.
Edmund Reese: This combination is enhancing our earnings power and positioning us to deliver on our four-year commitments and long-term financial objectives. As a result, we are reaffirming our full-year guidance, including mid-single-digit or greater organic revenue growth. 80 to 90 basis points of margin expansion, including $260 million in cumulative annual savings from our Aon United Structuring Initiative. Strong earnings growth. and double-digit free cash flow growth in 2025 and a double-digit three-year CAGR for 2023 to 2026. We are executing with focus. We have momentum and we remain confident in our ability to deliver long-term value for our shareholders.
Edmond: This combination is enhancing our earnings power and positioning us to deliver on our full year commitments, and long-term Financial objectives.
Edmond: as a result, we are reaffirming our full year guidance, including
Edmond: mid single digit or greater organic Revenue growth.
Edmond: 80 to 90 basis points of margin expansion, including 260 million in cumulative, annual savings from our aeon United, restructuring initiative,
Edmond: Strong earnings growth.
Edmond: And double digit free cash flow growth in 2025 and a double digit 3 year kegger for 2023 to 2026.
We are executing with Focus.
Unknown Executive: So with that, let's jump into your questions.
Edmond: We have momentum and we remain confident in our ability to deliver long-term value for our shareholders.
Unknown Executive: Donna, back to you. Thank you.
So with that, let's jump into your questions. Donna back to you.
Unknown Executive: The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. We do ask that you please limit yourself to one question and one follow-up. Again, that's star 1 to register a question at this time.
Jimmy Bhullar: Our first question this morning is coming from Jimmy Bhullar of J.P. Morgan. Please go ahead. Hey, good morning. So first, just a question for Greg on the contribution to growth from capital markets activities and new hires. On new hires, I think Edmund had outlined it yesterday that the contribution should pick up as you go through this year. So assuming that hasn't changed, but you could comment if it has. And then on capital markets, not sure if you're seeing or expecting a greater impact in the third and the fourth quarters versus what you've seen in the first half, given that it looks like M&A, IPO activity across the board is picking up in several industries.
Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2. If you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset. Before pressing the star Keys. We do ask that. You, please limit yourself to 1 question and 1 follow-up. Again, that's star. 1 to register a question at this time.
Our first question this morning is coming from Jimmy bar of JP Morgan. Please go ahead.
Gregory Case: First of all, we appreciate the questions. We'll start with M&A Services and then maybe go to talent when you're asking your second question. Listen, M&A Services, you know this story well from our side. We love this space. We're unbelievably well positioned to win. We've been investing behind this capability because we know how important it is from a client standpoint. And we've been investing behind it, you know, in times when it wasn't doing so well. We've said to you before on calls, we're going to quit projecting and we're going to talk to you about the rearview mirror.
Jimmy: Hey, good morning. Um, so first just a question for Greg on the contribution to growth from Capital markets activities and new hires on new hires, that I think Edmund had outlined at in yesterday that the contribution should pick up as you go through this year. So, assuming that hasn't changed and but you could comment if it has and then on Capital markets. Um, not sure if you are seeing, um, or expecting a greater impact, um, in the third and the fourth quarters versus what you've seen in the first half. Given that it, it looks like m&a, IPO activity across the board is picking up in several Industries.
Edmund Reese: As this has impact, you will see it have impact. And we've made progress in the quarter. You know, maybe describe it as better, but not back. You certainly see the pipelines pick up as you've heard the investment banks describe. But there's, you know, tremendous amount of dry powder still out there on the sidelines. And we made, you know, we made progress. And as Edmund described, it was a tailwind in the quarter. But, you know, literally the overall impact on our growth and performance in the quarter was really very broad-based, as Edmund described. So generally very positive, good prospects.
Jimmy: First of all, give me appreciate uh the questions uh we'll start with m&a services and then maybe go to Talent what you're asking to your second question. Listen m&a Services, uh, you know this story. Well from our side, we love this space. Uh, we're unbelievably well positioned to win, we've been investing behind this capability because we know how important it is for a client standpoint and we've been investing behind it you know in times when it wasn't doing so well. Um we have we have not, we we've said to you before on calls what we're gonna quit projecting and we're going to talk to you about the rear view mirror, was this as impact. You will see it have impact and we've made progress in the quarter. Um, you know, maybe describe it as better, but not back. Uh, you certainly see the pipelines. Pick up as you've heard, the investment Banks described. Um but there's, you know, tremendous amount of dry powder still out there on the sidelines and we made, you know, we made progress. Um, and as Edmond described it was a Tailwind in the quarter but you know, literally uh, the overall impact of in our growth in the performance, in the quarter was really very broad-based as have been described so, so generally very positive.
Edmund Reese: But, you know, describe it as progress. But, Edmund, what else would you add before we go to talent? Yeah, just on the M&A point, Greg, just reiterating your point. It strengthened in Q1, Jimmy, and in Q2. That was modest growing over a low base. There's modest growth in our second half outlook for M&A. We still expect to maintain our mid-single-digit growth levels despite that. If it comes in stronger, then that will be a tailwind for us. The point I want to emphasize is the point that Greg made about broad-based growth. M&A falls into our commercial risk segment, which was at 6% for the quarter, again, right in line with our expectations.
Edmund Reese: We weren't surprised by that. That was strength driven by what I mentioned in my prepared remarks, our core P&C business in North America. Double-digit growth in construction, that means the priority hires. The next part of your question is contributing right in line with our expectations. M&A was a tailwind but not the key driver. I'll also point out in construction our international markets. particularly in EMEA and LATAM. And again, there, the growth was driven by new business and the impact of us hiring in those markets. So the growth was broad-based across our different solution lines, coming from new business and new hires.
Wait Greg just reiterating your point. It strengthened in q1 Jimmy. And in Q2 that was modest growing over a low base. There's modest growth in our second half outlook for m&a, and we still expect to maintain our mid single digit, uh, growth levels despite that if it comes in stronger than, that'll be a Tailwind for us, the point. I want to emphasize is the point that Greg made about broad-based growth. M&a falls into our commercial risk segments, which was at 6% for the quarter again, right. In line with our expectations, we weren't surprised by that, that was strength driven by what I mentioned. In my prepared remarks, our core PNC business in North America, double digit growth in construction. That means the priority hires. Would you the next part of your question is contributing right in line with our expectations. M&a was a Tailwind but not the key driver. I'll also point out in construction our International markets
Edmund Reese: And on your second question, Greg, do you wanna, should I start there? On the second question, you're right, we did. I think the first thing, you heard me say it in the remark, I'd point out is that through six months, we're up 6% in revenue generating hires. So right in line with the four to 8% that we communicated at Investor Day. That is strong growth in the priority areas. We saw growth in energy. Again, I'll mention double-digit growth in construction. So those are areas that we think are outpacing GDP growth, but we're doubling down on.
Jimmy: Particularly in the Mia in latam. And again there the growth was driven by new business and the impact of us hiring uh in those markets. So the growth is broad-based across our different solution lines coming from new business and and new hires and on your second question. Greg, do you want to should I start there? Um, on on the second question. You're right. We did, I think the first thing you heard me say it in the remark, I'd point out is that through 6 months we're up 6% in Revenue, just
Jimmy: Generating higher. So, right, in line with the 4 to 8% that we communicated at investor day,
Edmund Reese: Contribution at 11 points of contribution from new business to our organic revenue growth. That's broad-based, but there's a significant component of that as we start to see the new hires pick up in their contributions. So we still remain confident in what we said at Investor Day of 30 to 35 basis points of contribution from the 24 cohort of new hires. And the last point I'll make on it is that we're just gonna stay focused on this. We're a growth company, so we'll remain committed to investing in talent, in the tools that we talked about on the calls, and the capabilities through ABS as well.
Jimmy: That is strong growth in the priority areas, we saw growth in energy. Again, I'll mention double digit growth in construction. So, those are areas that we think are outpacing, GDP growth where we're doubling down on,
Jimmy: Contribution at 11 points of contribution from new business, to our organic Revenue growth. That's broad base, but there's a significant component of that. Uh, as we start to see the new higher pickup in their contribution, so we still remain confident. And what we said at an investor day of 30 to 35 basis points of contribution from the 24 cohorts. And the last point I'll make on it is that we're just going to stay focused on this where Growth Company, so we'll remain committed to investing, uh, in talents in the tools that we talked about on the calls in the capabilities through ABS as well.
Unknown Executive: Thanks.
Gregory Case: And maybe just a question on your preferred uses of free cash flow. You mentioned deleveraging, as you had outlined at the end of the NFP deal. But just maybe comment on your interest in large M&A. It seems like the antitrust environment is better than it was before. And some of your peers have done larger deals since you did the NFP acquisition. But just your interest in large scale M&A as a use of cash flow. Yeah, maybe I'll make a few points about where we are in our position, which is strength, a position of strength, and then I'll turn it to Greg and talk a little bit broader about the environment.
Speaker Change: Thanks, and maybe just a question on your preferred uses of free cash flow. You mentioned, um, the leveraging, um, as you would outlined at the end of with the NFP deal but just, uh, maybe comment on your interest in large m&a. It seems like the antitrust environments better than it was before and some of your peers have done larger deals since you did, um, the nfb acquisition but just your interest in large-scale, uh, m&a.
The use of capital.
Edmund Reese: But I start this, the answer to this question, which is the free cash flow growth 59% in the quarter, 13% in the quarter, 13% year to date coming from our operating income, coming from NFP, coming from integration and transaction costs winding down, as we called out as investor day. And so the confidence in double digit free cash flow is very high. And that means that we are in a position of strength with flexibility. And on that point about flexibility, the priority, of course, is getting that leverage ratio down. We're well on track to be able to do that.
Gregory Case: We're paying the dividend. But we will continue to evaluate assets that meet our strategic and financial criteria. We're very diligent on ensuring that our M&A decisions are accreted to returns. I put up a slide during investor day that said 12% revenue growth after 1 year of ownership over 20% of IRR and industry leading ROIC. So my point is that we are in a position of strength with the free cash flow. We have the flexibility. We're going to use the right criteria to evaluate as we continue to invest for growth. But Greg, maybe a little bit on the environment.
Speaker Change: Yeah, maybe I'll make a few points about where we are in our position which is strength of position of strength and then I'll turn it to Greg to talk a little bit broader about the environment. But I I start this the answer to this question, which is the free cash flow growth. 59% in the quarter 13% in the quarter, uh, 13% year to date coming from our operating income coming from NFP coming from integration and transaction costs winding down as we call out to in, as in yesterday. And so the confidence in double digit. Free cash flow is very high and that means that we are in the position of strength with flexibility and on that point about flexibility, the priority, of course, is giving that leverage ratio down. We're well on track to be able to do that. We're paying the dividend, but we will continue to evaluate assets that meet our strategic and financial criteria, we're very diligent on ensuring that.
Gregory Case: Yeah, and listen, you captured it very well, Edmund. Jimmy, you get the point here. This is an underlying foundation that's driven our capital allocation decisions for a long time, just fully reinforced by Edmund. This is operating on strength with flexibility, but go back in time, return on capital, cash on cash return, true evaluation across the spectrum. And also remember, we're buying and selling, right? We are managing capital in a way in which we are absolutely focused on it. And we'll take steps to to focus the portfolio if it's going to be helpful and add to the portfolio in any way it's going to support us as well, you know, from dividend to buyback to acquisition in every way, shape or form.
Speaker Change: Our m&a decisions are accredited to returns. I put up a slide during an investor day that said 12% Revenue growth after 1 year of ownership over 20% of irr and Industry leading roic. So my point is that we are in a position of strength with the free cash flow. We have the flexibility, we're going to use the right criteria to evaluate, um, as we continue to invest for growth. But Greg, maybe a little bit on the environment.
Unknown Executive: So appreciate the question. But, you know, we're excited about the potential here. Thank you.
Speaker Change: Absolutely focused on it. Um and uh, we'll take steps to to focus the portfolio. If it's going to be helpful and added the portfolio in any way, it's going to support us as well. Uh, you know, from dividend the buyback to acquisition uh, in every way shape, or form. So appreciate the question. But, um, you know, we're, we're, we're excited about the potential here.
Speaker Change: Thank you.
Elyse Greenspan: The next question is coming from Elyse Greenspan of Wells Fargo. Please go ahead. Hi, thanks. Good morning. My first question is also on the M&A transactional book. I was just wondering, is it overly any geography or industry vertical? Or is it pretty diversified? And then directionally, is the margin better or worse than the core PNC margin within the commercial risk segment? Appreciate the question, Elyse.
Speaker Change: Thank you. The next question is coming from Alita.
Go ahead.
Hi, thanks. Um, good morning. Um, my first question is also, um, on the m&a transactional book. Um, I was just wondering, is it overweight, um, any geography or industry vertical or is it pretty, um, Diversified and then directionally is the margin, um, better or worse than the core PNC margin, um, within the commercial risk segments.
Gregory Case: Listen, we happen to talk about M&A services all day long, so I just love the questions. For us, remember, we have truly invested in world-class capability and content here. And we continue to do it when it wasn't as robust. The demand wasn't as robust for all the reasons that we all know. We described at the time that we have expanded our capability. So we expanded it both geographically as well as beyond just sort of the classic PE focus. So it really is to the corporate world too. If you think about sort of the uses of M&A services, they've predominantly been directed toward the PE world, but equally compelling in the context of the overall corporate world.
Speaker Change: Uh appreciate the question always listen. Uh we happy to talk about m&a Services all day long. So just love the questions uh for us. Remember we have, um, truly invested in world-class capability and content here, uh, and uh, and we continue to do it when uh, when it wasn't as as robust, the man wasn't as robust for all the reasons that we we all know. Uh, we we described at the time that we have expanded our capabilities so we expanded it both geographically as well as Beyond just sort of the classic PE Focus. So it really is uh you know, to the corporate world too. If you think about sort of the uses of m&a services, they predominantly been
Edmund Reese: So from our standpoint, what we've got is broad-based capability and what we believe will be, with time, very broad-based demand across the world. And now even broader in terms of sort of how it's going to be applied. So again, we're excited about the potential. We've always been. Nothing's changed there. But as Edmund and I both tried to describe, better, not back, right? There's a long way to go here with a lot of dry powder, and we're going to continue to see it evolve over time.
Speaker Change: Directed toward, uh, you know, the PE world, uh, but equally compelling in the context of overall overall, the overall corporate world. So for from our standpoint, um, what we've got is broad-based capability and what we believe will be uh with time very broad-based demand uh across the world uh and and now even you know, broader in terms of sort of how it's going to be applied. So again we're excited about the potential. We've always has been nothing's changed there. Uh but you know as Edmond and I both tried to describe better.
Edmund Reese: On the margin question, Edmund, can you comment on that? Edmund Yeah, and I think first on the first question, your operative word there is broad-based. So, at least the growth is a tailwind, but modest, but we saw that growth across all of our regions. EMEA was strong, Asia-Pacific was strong, just like U.S. as well in the M&A space. On the margins, I think your question is about margins in the components of commercial risk versus the other areas. I think the key thing for us is that commercial risk has a slightly higher margins, but the margins are in line.
Speaker Change: Not bad, right? There's a long way to go here with a lot of dry powder and we're going to continue to see it evolve over time. Uh on the margin question Evan you're going to come out on that.
Edmund Reese: I don't pay too much attention to a particular, we're an annual company, so the margin in a particular quarter isn't where I'd focus, but most importantly, the key area of focus should be the expansion in both margins, on the commercial risk side and on the human capital side, and we're seeing that expansion across both the segments because it's driven by the operating leverage and the scale improvements that we get through ABS, and we're seeing it across our solution.
Yeah. And and I think first on the, on the first question, your operative word, there is broad-based. So at least the growth is a Tailwind, but modest. But we saw that growth across all of our regions Amia with strong asia-pacific with strong. Just like us uh, as well. Um, in in the m&a space on the margin. I think your question is about margins in the components of commercial risk versus the other areas. I think the key thing for us is that commercial risk has a slightly higher margins. But the margins are in line, I don't pay too much attention to a particular we're an annual company. So the margin in a particular quarter isn't where I'd Focus. But most importantly, the key area of focus should be the expansion and both margins on the commercial risk side and uh on the human capital side and we're seeing that expansion across both the segments because it's driven
Speaker Change: By the operating leverage in the scale improvements that we get through ABS. So we're seeing at the cross, our our Solutions
Unknown Executive: Thanks.
Unknown Executive: And then my second question, I was hoping you could spend a little bit more time on what's the pretty strong free cash flow growth in the quarter. And then I know the full year guide is for 300 million from NFP free cash flow, where do we sit through the first half of the year? Yeah, so I caught that. I mean, you're, you're answering, again, you're answering the question within, within the question there. Those are the drivers. Like, I think there are four areas to keep your eyes on when you think about our free cash flow growth and how we get to double digit.
Speaker Change: And my second.
Um, I was hoping you could spend a little bit more time on, what role? The pretty strong. Free cash flow growth in the quarter and then I know the full year guide is for 300 million from NSP free cash flow, where do we sit, um, through the first half of the year?
Edmund Reese: One is the operating income growth. And within that, NFP, both of those items were contributing for us in the quarter. So we feel very good about the $300 million in 2025 free cash flow contribution from NFP on that quarter. That answers my question. The second area for us is the continued working capital and improvements, and in particular, day sales outstanding. I called that out in the prepared remarks that we continue to focus on that by region within our procurement teams. So we continue to see benefits from that as well. The third area that I'd focus on is restructuring, the AON United restructuring program.
Edmund Reese: That continues to be a degradation of free cash flow as we go through 2026 in line with our plans on that. The benefit that we saw in addition to those three items in the quarter was through, was through the lower NFP transaction and integration costs. Just as I said, at investor day. So operating income. including NFP, the working capital improvements in the lower transaction and integration costs from NFP. That is what are the, those are the drivers for 13% year to date and just continued strength in those drivers is what will have us on track for double digits in 2025.
Speaker Change: Yeah, so I called that. I mean your your answer again, your answering the question within uh within the question there and those are the drivers. Like I I think there are 4 areas to keep your eyes on when you think about our free cash flow growth and how we get to double digit, when is the operating income, uh, growth in within that NFP, both of those items were contributed for us in the quarter. So we feel very good about the $300 million in 2025, free cash flow contribution from NFP on that question. Uh, the the second area for us is the continued working, capital and improvements and in particular Day sales outstanding, I called that out in a prepared remarks that we continue to focus on that by region within our procurement teams so we can continue to see benefits from that as well. The third area that I'd focus on is restructuring uh the Aeon United restructuring program that continues to
uh, be a a degradation to free cash flow as we go through 2026 inline, with our plans on that, the benefit that we
Speaker Change: See items in the quarter was through uh was through the lower NFP transaction and integration costs. Just as I said at uh investor day. So operating income
Gregory Case: But it's, at least in this one, I want to point here, an important one, because you touched on the key, the keynote for us, which is free cash flow and free cash flow growth. So Edmund just described very well, what's happening in the year, what's happening year to date, all exactly on point.
Gregory Case: Step back. Remember, we are all about revenue and revenue enhancement, and then the translation of free cash flow from revenue, period. And we look at that in every angle, every shape you can imagine. And you look at our history, we've done double digit free cash flow growth for a long period of time. And then, we add the three-by-three plan. And the three-by-three plan with Aon Business Services is again, it's a leverage to revenue. It's a leverage on capability, driving revenue. You're seeing that opportunity. And then it is a leverage to operating improvement, operating efficiency. So for us, we did double digit without Aon Business Services.
Ments in the lower transaction integration costs from NFP. That is what are the those are the drivers for 13% year to date and just continued strength. In those drivers is what will have us on track for double digits in 2025 but it's an at least to this point. I want to point here, an important 1 because you touched on the key, the keynote for us which is free cash flow and free cash flow growth. So Edmund just described very well, kind of what's happening in the year. What's happening here today? All all exactly on point, step back. Remember, we are all about revenue and revenue enhancement and then the translation of free cash flow from revenue period. Uh, and we look at that in every angle, every shape you can imagine. And, you know, you look at our history, we've done double digit, uh, free cash flow growth for a long period of time. And then
Unknown Executive: Now Aon Business Services is continuing to come on fully online. And what we're now underscoring is reinforcing our ability to deliver that. You're seeing that come to fruition. So for us, we absolutely want you to stay focused on free cashflow. We are as well. And the opportunity here for us, we think is substantial which is why we're reinforcing guidance around this but understand the mechanics of this isn't about just a 25 result. It's about 25, 26 and ongoing well beyond the three-by-three plan period. Thank you.
Speaker Change: We add the 3 by 3 plan. And the 3 by 3, plan with aeon Business Services is again. It's a, it's a leverage to revenue. Uh, but the leverage on capability, driving Revenue, you're seeing that opportunity. And then it is a leverage to operate and Improvement operating efficiency. So for us, we did double digits without AI Business Services. Now am Business Services, continuing to come on fully online. And and what, you know what, we're now underscoring and reinforcing our ability to deliver that you're seeing that come to fruition. So for us, um, we absolutely want you to stay focused on free cash flow. We are as well. And the uh, the opportunity here for us we think is substantial which is why we're reinforcing guidance uh around this uh but understand the mechanics of this
Speaker Change: Uh, isn't about to just say 25 results. It's about 25 26 and ongoing. Well beyond the 3x3.com.
Speaker Change: Thank you.
Andrew Kligerman: The next question is coming from Andrew Kligerman of TD Cowen. Please go ahead. Hey, good morning. So, um, you know, back when you closed on the NSP deal about a year, a year plus, we The talk was of the expectation of generating about $175 million in revenue synergies, coupled with about $60 million in cost synergies. And I think Edmund, you mentioned that this year you're on track for $80 million in revenue synergies. So looking out to 2026, I'm How are you progressing there? What can we expect?
Andrew Klarman: Thank you. The next question is coming from Andrew. Klarman of TD Cowen. Please go ahead.
Andrew Klarman: Hey, good morning.
Speaker Change: so, um,
Speaker Change: You know, back when you uh closed on the NSP deal about a year, a year plus.
Speaker Change: The talk was of uh the expectation of generating about 175 million energy coupled with about 60 million in cost synergies and I think admin you mentioned that this year, you're on track for 80 million of Revenue Synergy. So looking out to 2026. Um,
Gregory Case: along these these numbers maybe any any specific numbers you could provide around these metrics as we look to the incremental upside in 2026. Andrew, thanks for the question.
Speaker Change: How are you progressing there? What what can we expect?
Speaker Change: Along these, these numbers May any any specific numbers. You could provide around these metrics as we look to the incremental upside in 2026.
Gregory Case: Maybe just a bit of context around NFP overall and the progress, because then it sets up the specifics and sort of how they've continued to strengthen and evolve, which Edmund can take us through. Listen, to step back, we talked about this on Investor Day, high expectations as NFP came into the Aon world, and they have been exceeded. It's been truly terrific for us to sort of get a chance to work with this team, support them, and they support Aon. It's actually been a great, great combination. And you've seen this show up on the revenue side and the organic revenue side and what we've been able to do, as well as on the operating side, which showed up, you know, sort of in the core of it is showing up throughout the overall year.
Speaker Change: Andrew. Thanks for the question. Maybe just a bit of context around NFP overall and the progress because then it sets up uh, the specifics and sort of how they've continued to strengthen and evolve which have been can take us through. Um, listening to step back, we talked about this on investor day. Uh high expectations is NFP came into the, A on world and they have been exceeded. It's been uh truly uh been terrific for us to sort of get a chance to work.
Edmund Reese: So for us, this is exactly what we hoped it would be, the platform, and then the platform also upon which we can add the programmatic M&A that Edmund talked about as well. And really a lot of this driven, as you think about NFP overall, on the idea of independent and connected. Independent and connected has made a huge difference as we think about, you know, adding capability to NFP from a producer front, but also from an M&A front, us more attractive to others who want to be part of the overall Aon world.
Edmund Reese: So I just want to set context as you think about sort of NFP and the progress we've made. And then against that, absolutely, you're seeing it show up in the outcome.
Unknown Executive: So maybe Edmund, a little comment on that. Got it.
Speaker Change: This team, uh, uh, support them and they support aeon, it's actually been a great, great combination, and you've seen this show up on the revenue side and the organic Revenue side, and we've been able to do as well as on the operating side which which, which showed up, you know, um, sort of in the court of just showing up up throughout the overall year. So for us, this is exactly what we hoped it would be the platform. And then the platform also upon, which we can, uh, add the programmatic m&a that have been talked about as well. And really a lot of this driven, as you think about NFP overall, uh, on the idea of independent and connected independent and connected made a huge difference is, as we think about, you know, adding capability to NFP and from a producer front. But also from an m&a, front us more attractive to others who want to be part of the overall Aon world. So, I just want to set context as you think about sort of NFP and the progress we've made, uh, and then against that, uh, absolutely. You're seeing it show up in the outcome. So maybe having a little comment, uh, on that.
Speaker Change: Yeah, Andrew on this question, the first thing that Greg and I both highlight is producer retention, that's because without that you're not going to have any of the revenue synergies come through. It's better than it was pre-acquisition and then 2025 we continue to be as strong as we were in 24 on producer retention as well and that's driven by the independent the connected strategy that Greg uh was just talking about. So first step is minimizing any Revenue leakage to date. You're right with the numbers that you mentioned, 80 million in 2025.
Speaker Change: Third-party wholesale to Aeon expertise capability that we have that, that that was exactly what we thought when we thought about opening up the Aeon store to the NFP. Population 2 is using our Aon Global broken Center for international placements and specialized placements. That has been an area of growth and strength at NFP taking advantage of and contributing to the synergies, uh, thus far. And then we have mid Middle Market panels in place in places like marine and terrorism. And Builder's risk, places that are even that certainly relevant in the macro environment that we're in right now. So those are areas that we're focused on to be able to meet the 80 million commitment in 2025 and 175 million in 2026, which we continue to be confident in.
Unknown Executive: And then just second question is around reinsurance solutions. You talked about double digit increases in ILS and facultative placements. How should we think about the dynamic with treaty? Is that kind of taking from treaty or do you see kind of an uplift in both? Like, how should we think about that dynamic between the two product areas, ILS and treaty? This is the wheelhouse in terms of sort of net new demand as it evolves over time that we're going after. And so, you know, pretty excited about the opportunities here as they connect reinsurance and commercial risk and same story on the commercial risk side, we can talk about as well.
Speaker Change: Got it and and let me just a second question is around, uh, reinsurance Solutions. You, you talked about double digit increases in ILS and and facultative placements. How should we think about the dynamic with, with treaty? Um, is that kind of taking some treaty or, or do you see, kind of an uplift in both? Like how, how should we think about that dynamic between the 2 product areas? ILS and treating. Andrew love the question. We'd suggest you step back a little bit and think about this isn't really from a product orientation.
Speaker Change: It's from a client orientation. I mean, we're literally stepping in asking the question, how can we help clients both defend the house? Think about their balance sheet and what they're doing, but also grow it. And actually, build build, build, build capability, and for us. Um, whether treaty faculty ILS, all these things, sort of come into play as you think about helping the client do that, so in many respects, not competing, but complimentary. Uh, and for us that's been a, it's really been a, a great story, uh, from the reinsured standpoint. We've just got such an remarkable capability, remarkable Global capability, that continues to get stronger and now with the 3 by 3, plan and the investment behind it in analytics, uh, you know, absolutely tremendous and we highlighted, you know, I, you know, highlighted 1 of the examples that we, you know, we came up with this, the Search stop-loss opportunity. Uh, this is a net new ad that comes into the prey that helps us actually be better for marine Insurance standpoint, uh, and then, and then Andrew step back and understand.
Speaker Change: This capability as part of risk capital is then an amplifier, a big amplifier. So you've got reinsurance in and of itself, tremendously positive, continuing to progress with, you know, increasing demand great opportunity within risk Capital. Now, we're talking about how to take this capability and really embed it into the commercial risk decision process as well. Very complimentary. Now, we're now we're talking about the largest companies in the world trillion dollar. Balance. Sheets, asking the question around. How do I understand volatility and the answer to? That is not a product. It's not an individual solution, line. It is, it is global AI.
Speaker Change: Um, you made him think about just ILS and what we've done for commercial companies emanating from reinsurance in 2021, we did basically no deals 2020 at nothing and 24. We did 109 and year to date 25, we're already at roughly a hundred. I mean, this is this is truly remarkable in terms of what the opportunity is here. So for us, this is the
Speaker Change: This is the Wheelhouse in terms of sort of net new demand, as it evolves over time, that that we're going after. And uh, so you know, pretty excited about the opportunities here. Uh, as a connect reinsurance and Commercial risk, and the same story on the commercial risk side, we can talk about as well.
Unknown Executive: Thanks, very helpful. Thank you.
Speaker Change: Thanks very helpful.
Rob Cox: The next question is coming from Rob Cox of Goldman Sachs. Please go ahead. Hey, thanks. Good morning. Yeah, just a question first on talent, the revenue generating headcount seems like it's up 6% year to date. And, you know, this push has been successful. I'm curious, you know, has this changed your mind at all about the sort of run rate future investments in talent? And is this four to 8% increase annually, for the right level to think about going forward?
Thank you. The next question is coming from Rob Cox of Colton. Saxs, please go ahead.
Rob Cox: Hey, thanks. Good morning.
Speaker Change: Uh yeah, just a question first on Talent.
Speaker Change: Generating headcount seems like it's up 6% year to date and you know, this push has been successful. I'm curious, you know, has this changed your mind at all about the sort of run rate future investments in talent and is this 4 to 8%? Increase annually sort of the right level to think about going forward.
Gregory Case: Maybe Rob, if I could, I'm going to start with an overview. But I mean, I've been really digging on this. This talent question is important. It really is part of the conversation we had on on the Investor Day around adding content and capability. But I really want to want to touch on this for a bit. Look, when we think about talent, remember, the mission of our firm is, you know, is client obsessed. I mean, it literally is helping clients make better decisions and get the better outcome. We have the capacity to make the hires primarily because of the eight on business services, ABS, and the scale improvements that we get there.
Maybe Rob, if I could, I'm gonna start with an overview, but it may have been really digging on this, this Talent questions important, it really is part of the conversation. We had on on the investor day around adding content and capability, but but I I really want to want to touch on this for a bit look. When we think about Talent, remember the mission of our firm is is you know is client obsessed. I mean it literally is helping clients make better decisions and get the better outcomes.
Speaker Change: Is ADD Talent.
Speaker Change: You know, better capability but we've got to help them be better at Aon.
Speaker Change: So somebody coming over to Aeon without the analyzer is is not a net, add somebody come on without sort of the improvements in service. And what we do with certs Etc is not an ad. So for us Rob this is, this is this is talent in the right areas and then it's reinforced by by Aion by what we do by Aion business services. And so, and then then then we basically made the point and Edmund had made it well on investor day and allowed me to comment on a more now. Is this is about continuous Improvement.
Speaker Change: It's continuous Improvement in terms of what we're trying to do on on their behalf to support clients but also continuous investment. And the Machine we're talking about here is a machine that is that is, you know, drives Topline improves operating performance but also invests back into the business on an ongoing basis. So for us we're going to continue continuously, look at this, we're going to we're going to evaluate it. We're going to make the right calls by this is capital allocation. We're going to make the right calls in terms of what we're trying to do, and we see more and more potential to bring talent in particularly because we can amplify the talent that comes in. That's also why they come they're excited to to to, to do something to allow a client, to do something with their clients. They haven't been able to do before, uh, and that's what makes us attractive and that's the commitment we have to them. So, I, I want to offer that view at a macro level and then Edmond, you know, talk about where we are in the year and what we're expecting, uh, over over over the planet period. Yeah, I'll start by emphasizing your point G.
This is about meeting client, needs meeting client need. If you do that, then you drop and we're very specific about this word uh, Rob sustainable, organic Revenue growth. If you meet the client need then you can drive this sustainable organic Revenue growth. You do that by making these hires
Gregory Case: I'll refer you back to the slide at Investor Day on margin expansion and growth, and investment and growth, where we drive this margin expansion through eight on business services, we get some benefit from expense discipline, and then we invest 40 to 60 basis points in revenue generating hires and other capabilities. The objective there is to meet our near term objectives, double digit free cash flow growth in the current year here, and invest for ongoing sustainable top line growth. If we can get more from the scale improvements, then we'll invest more. If we can deliver in the current year and are outperforming, then we'll invest more.
We have the capacity to make The Hires primarily because of the A on Business Services, ABS in the, in the scale, improvements that we get there. Our refer, I'll refer you back to the slides at the investor day on margin expansion and growth, uh, and investment and growth. What we drive this margin expansion through a, um, Business Services. We get some benefit from expense discipline and then we invest 40 to 60 basis points in Revenue, generating hires and other capabilities. The objective, there is the meat, are near-term, objectives, double digit, free, cash flow growth in the current year here and invest for ongoing sustainable Topline growth. If we can get more from the scale improvements, then we'll invest more.
Unknown Executive: If we find the investments in the right areas, areas that we think are growth, it's not about quantity, we keep saying here, it's about quality talent in the growth area. So that is the model for us is to create the capacity to both grow and expand margins that allow us to hit our immediate near term financial objectives, but have sustainable growth in the long term as well. And if we can create more opportunity to invest more than we're going to do that with that in mind. That's great. Thanks for all the color there.
Speaker Change: If we can deliver in the current year and or outperforming, then we'll invest more.
Speaker Change: If we find the investments in the right areas, areas that we think are growth is not about quantity, we keep saying here, it's about quality, uh, talent in the growth area. So, that is the model for us is to create the capacity to both grow and expand margins. That allow us to hit our immediate near-term financial objectives, but have sustainable growth in the long term as well. And if we can create more opportunity to invest more, then we're going to do that with that in mind.
Rob Cox: And if I could just follow up on maybe a broader question on the economy. Broad strokes, what are you hearing from clients? And how are you thinking about growth and exposures in the back half of the year? Well, listen, Rob, again, back to kind of what we talked about in the investor day context. Look, these four megatrends we've talked about, trade, technology, weather, workforce, they just continue to be reinforced. As we said, the investor day, we were talking about trade a year before, you know, the liberation day. And now it's been intensified massively. And we're seeing that.
Speaker Change: That's great. Thanks for all the caller there.
Gregory Case: I would observe, though, listen, the three by three plan and the investments we're making, again, not something we created. It's something we listened to clients and we responded to. We just responded to an industrial strength level. And it is true, there is more volatility. We've been talking about that for a decade, more risk. And there's a need for real capability to respond to that. But if you think about it, there's no denying the complexity, no denying the volatility. Unmanaged, by the way, what happens? Complexity creates uncertainty, ambiguity, and it slows everything down. Action stops, investment stops.
Speaker Change: And if I could just follow up on, you know, maybe a broader question on the economy and Broad Strokes, what are you hearing from clients? And how are you thinking about growth and exposures in the back half of the year? Um, well, listen, Rob again, back to kind of what we talked about, um, because in the investor day context. Look, uh, these 4 Mega Trends. We've talked about trade technology, whether work force, they just continue to be reinforced as we said the investor day. We were talking about trade a year before, uh, you know, the Liberation day. And, uh, now it's been intensified massively. Uh, and we're seeing that I would observe though listen, the 3 by 3 plan and the Investments, we're making again, not something we created. Uh, it's something we listen to clients and we responded to we just responded to at an industrial strength level, um, and it is this
Gregory Case: That's what everybody's worried about. Look, we think about it as complexity, again, no denying it. But if you can help a client understand options, real options, and then you've got solutions behind the options, they see advantage and they see speed and be clear, our clients want to take action. But if pandemic taught us nothing else, it was, you know, inaction is not a great outcome, you know, hope's not a strategy, they came to realize that they're looking for actions. And, and I'm just I'm just trying to think one example I'll share with you. Because it resonated very strongly for me.
Speaker Change: True. There is more volatility. We've been talking about that for a decade more risk, um, and, and there's, you know, there's a need for real capability to respond to that. But if you think about it, you know, there's no denying the complexity. No denying the volatility, unmanaged, by the way, what happens complexity, you know, creates uncertainty, and ambiguity, and it slows everything down action, stops investment stops. That's what everybody's worried about.
Speaker Change: Just, I'm just trying to think, 1 example. I I'll I'll share with you. Um,
Gregory Case: I I've been having conversations, ongoing conversations we have across across the firm with a CEO, one of the largest builders in the world. And we've been talking about in this over the last three months, and they've been talking about their portfolio of major infrastructure projects. And these are mega around the world, and they're open for bid. And they're massive, as I said, but they're also complex, and the geography is complex, and the geopolitics are complex. And three months ago, they're talking about a pullback, literally, maybe a no bid on a number of them. And they're just taking a hugely reserved position.
Gregory Case: We spent time over the last three months on a set of analytics that help them understand ways to reduce aspects of volatility, I mean, we're not going to change the operating underlying aspects, but all the things that surround those projects. And now they've got a brand new prioritization around what they're going to go after real offense. And in their mind, they've got great conviction around a subset of these, they think is a greater opportunity. And so what I'm trying to highlight for you is all that you read all that's out there is real, but you understand clients want to take action, and they want the content to be able to take action with conviction.
Speaker Change: Because it resonated in very strongly for me. I've been having conversations ongoing conversations, we have across across the firm, with the CEO of 1 of the largest builders in the world. And we've been talking about and this over the last 3 months and they've been talking about their portfolio of major infrastructure projects and these are Mega around the world and they're open for bid and they're massive as I said, but they're also complex and the geographies complex and the geopolitics are complex and 3 months ago, they're talking about a pullback. I mean literally maybe a no bid on on a on a number of them and they're just taking a hugely reserved position. We spent time over the last 3 months on a set of analytics that help them understand ways to reduce aspects of volatility. I mean, we're not going to change the operating, uh, uh, underlying aspects. But all things, that surround those projects and now they've got a brand new prioritization uh, around what they're going to go after real offense. Uh, and and in their mind, they've got great conviction around the subset of these, uh, they think is a greater opportunity. And so what I'm trying to highlight for you is
Gregory Case: And that's us, I mean, this is the analyzers, this is the capability that we bring to the table, this is the matching of capital with risk, and matching beyond just insurance capital, but really pension capital and sovereign fund capital and PE capital. And so it really is in that context, for us a, an opportunity to help clients take a step ahead with conviction. And that's real opportunity, you know, recognizing the complexity that's out there.
All that you read, all the top, there is real, but understand clients. Want to take action and they want the content to be able to take action with conviction. And that's us, I mean, this is the analyzer. This is the capability that we bring to the table. This is the matching of capital with risk and matching Beyond, just Insurance Capital, but really pension capital, and Sovereign fund capital and PE capital. And so it really is in that context uh for us, a an opportunity to help.
Unknown Executive: So hopefully, that wasn't too much, but it gives you a sense on sort of literally what's happening in the market day to day. That's great. Thanks for that. Thank you.
Speaker Change: To take a step ahead with conviction and that's real opportunity. Um, you know, recognizing the complexity that's out there. So hopefully that wasn't, uh, too much but it gives you a sense on sort of, literally, what's happening in the market day to day.
Speaker Change: That's great. Thanks for that answers.
David Motemaden: The next question is coming from David Motemaden of Evercore ISI. Please go ahead. Hey, thanks. Good morning.
Speaker Change: Thank you. The next question is coming from David. Mm of evercore, isi. Please go ahead.
Edmund Reese: Edmund, I was wondering if you could just size the tailwind to organic growth from the M&A services for both the total company and then specifically within commercial risk and then maybe help us think about it. I understand it's not back yet, but if it were back, how much of a contribution could it have? Yeah, David, thanks for the question. I mean, there certainly is a ton of emphasis on M&A right now. I prefer to stay focused on what the drivers are today here. And M&A is providing a tailwind for you. I've said before, growing off of the base that we have for M&A right now, you know, we have objectives of mid-single-digit or greater.
Hey, thanks. Good morning. Um, Edmond. I was wondering if you could just size the Tailwind to organic growth from the m&a services for both the total company and then specifically within commercial risk and then maybe help us
Speaker Change: think about it. Um, I understand it's not back yet but if it were back how much of a contribution could it have
Edmund Reese: You would need M&A to be multiples of that. You would need it to be four, five times that before it becomes a significant contribution to the overall organic growth rate that we have. The items that are driving it right now really is the core P&C business, the investment hires that we're making, the double-digit growth and construction, those investment hires driving new business right now. And so we're going to continue to be focused on new business and retention. The other big thing in commercial risk, we talked about retention being up one point year over year. And this is an opportunity to even call it our North American retention in commercial risk, which was up substantially given what we're doing with our priority accounts, with our premier accounts, what we're doing in terms of expanding coverage.
Speaker Change: Yeah, David. Uh, thanks for the question. I mean there. There certainly is a ton of emphasis on m&a right now. I I don't, I, I prefer to stay focused on what the drivers are today. Uh, here in m&a, is providing a Tailwind for you. I've said before growing off of the base that we have for m&a right now we, you know, we have objectives of mid single digit or greater. You would need m&a to be multiples of that. You would need it to be 4 5 times that before it becomes a significant contribution to the overall, organic growth rate that we have the items that are driving it right now, really is the core PNC business. The investment hires that we're
Edmund Reese: So M&A, I get the focus on that. Right now, it's a bit of a tailwind. I think our outlook is for it to be modest in the second half of the year. If it comes in higher, then that gives us more confidence in being at the mid-single-digit or greater levels in our balance. We're not dependent on that. We are more focused on recurring organic revenue growth. We'll maintain our fair share, as Greg said earlier, of M&A services, particularly with PE, and we're focusing on expanding with corporates. But our focus is on recurring revenue growth, and those are the drivers.
Speaker Change: Making the double-digit growth in construction, those investment hires driving uh new business right now. And so we're going to continue to be focused on new business and retention the other big thing in commercial risk. We talked about retention being up, 1 point, year-over-year, and this is an opportunity to even call out our North American, uh, retention and Commercial risk, which was up substantially given, what we're doing with our priority accounts, uh, uh, with our, um, Premier accounts what we're doing in terms of expanding coverage. So m&a, I get the focus on that right now. It's a bit of a Tailwind, I think our Outlook is for it to be modest in the second half of the year. If it comes in higher, then that gives us more confidence in being at the mid single digit of the greater levels in our bounce. We're not dependent on that, we are more focused on recurring, organic, Revenue growth. We'll maintain our fair. Share as Greg said earlier of m&a services, particularly with PE and we're focusing.
Gregory Case: And David, we're not trying to hedge here at all. But understand M&A services is intertwined, it connects with all of our aspects of our business. So it isn't just a transaction liability placement, it really is around a run up, you know, discussion, or it's around a whole series of other things related to, related to the P&L. So it's very interconnected. And I think Edmund characterized it perfectly. And you know, you'll see it play out as it plays out. And it looks like it may be a little more positive. But again, very connected to what we do across the firm.
On expanding with corporates. But our focus is on recurring Revenue growth and those are the drivers.
Hey David. We're not trying to head here at all, but understand m&a, Services is an intertwined. It connects with all of our aspects of our business. So it isn't just a transactional liability placement. It really is around. The runoff, uh, uh, you know, discussion or it's around a whole series of other things related to, uh, it's related to the p&l, so it's very interconnected. Uh, and, uh, I think I've been characterized as perfectly, uh, and, you know, you'll see it. Play out as a player.
Unknown Executive: That's why we're not going to really break it out as an individual piece, because it's really very, very supported by colleagues around the Understood.
Speaker Change: Out and it looks like it may be a little more positive. But, uh, again, very connected to what we do across the firm. That's why we're not going to really break it out as an individual piece because it's really very, very supported by colleagues around the firm.
Unknown Executive: Thank you for that. And totally understand on Just a follow up on the 6% increase in the revenue generating rolls through the first half, you know, already at, you know, halfway through the full year, the midpoint of the full year goal. Maybe you could just talk about the talent pipeline. And if you think there's maybe the potential to get above that 8% growth in revenue generating rolls that you guys had targeted for this year. And listen, Edmund described it very, very well, we're making calls on capability to help serve and support our clients, we're identifying, you know, we're identifying capability to come in in these priority areas, and with a game plan on how they can actually come in with high conviction and excitement about how they can do more than they've done before, not the same, more than they've done before.
Speaker Change: Understood, thank you for that. Um, and and totally understand on um
Speaker Change: Through the first half, um, you know, already at, you know, halfway through the full year uh the midpoint of the full year goal. Um, maybe you could just talk about the talent pipeline. Um, and if you think there's maybe the potential to get above uh, that 8% uh, growth in Revenue, generating roles that you guys had uh, targeted for this year.
Gregory Case: And so when we see those opportunities, you know, we will take advantage of them. You know, this is not a specific target Edmund's describing, exactly kind of what's what's come about. And we anticipate just, you know, continuing to maintain momentum. But listen, The analyzers matter. What we're doing on the client experience we described on it yesterday, next generation client experience, as the world understands what that really means at a micro level sitting across the table from a client, it's more interesting when you can actually help a client understand they don't have to actually deal with certificate proof of insurance, because we've actually digitized it and created an outcome with AI that literally makes it real they go, wow, I get to I get to talk to my client about being able to do that.
Speaker Change: Uh, and listen. What Edmond described it very, very well. We are. We're making calls on capability to help serve and support our clients, uh, where identifying, you know, we're identifying capability to come in in these priority areas and with a game plan, on how they can actually come in with a high conviction and excitement about how they can do more than they've done before, not the same, uh, more than they've done before. And so when we see those opportunities, um, you know, we we will take advantage of them. Um, you know, this is not a specific Target Edmond's describing exactly kind of what's what's come about and, uh, we anticipate just, you know, continuing to maintain momentum. Uh, but listen.
The analyzers matter, uh the the what we're doing on on, on the, the the the client experience. We described on investor day next Generation client experience as the world understands what that really means at a micro level sitting across the table from a client. We become work. It's more interesting. Uh, you know, when you can actually help a client understand, they don't have to actually deal with, um, you know, you know, cert, certificate, proof, proof of insurance, you know, because we've actually digitized it and created an outcome with AI. That literally makes it real time that a client could do themselves.
Gregory Case: They couldn't have done that before. These capabilities matter. And people see that producers see that they want to be part of a on and, and we invite that and we're going to nourish that as best we can, but it'll play out as it plays out. And we'll push it as the opportunity is there versus just pushing it to push it.
But a, wow, I get to, I get to talk to my client about being able to do that. They couldn't have done that before, uh, these capabilities matter and and people see that producers, see that. And they want to be part of Aon and and we invite that and we're going to nourish that as best we can, but it'll play out as it plays out. Uh, and we'll push it, uh, as the opportunity is there versus just pushing it to push it.
Unknown Executive: Great, thank you. Thank you.
Speaker Change: Great. Thank you.
Meyer Shields: Our final question today is coming from Mayor Shields of KBW. Please go ahead. Great, thanks so much and good morning. I was hoping to get an update on how sensitive clients of different sizes are to elevated social inflation or legal risk in the US. I know on the insurance side, obviously, it's a major concern, but I'm wondering whether it's penetrating the broader Meyer, thanks for the question. Listen, again, client orientation. Yes, it penetrates everywhere. Everyone reads and clients understand that in many respects, this is, this is focused ultimately on them in terms of sort of what it really means, absolutely focused on them.
Speaker Change: Thank you. Our final question. Today, is coming from mayor Shields of KBW. Please go ahead.
Speaker Change: Okay, thanks so much and good morning, um, to get an update.
To elevated social inflation or legal risk, uh, in the US, I know on the insurance side. Obviously it's a major concern, but I'm wondering whether it's penetrating the broader consciousness,
Speaker Change: Myer. Thanks for the question. Uh, listen.
Gregory Case: And they're concerned about it. Therefore, we're concerned about it. You saw, you know, in October of last year, the first to basically say, we're not, we're not going to support this. Because it really doesn't support our clients, period. We just said no. You know, especially focused on the North American and the US theater. So yes, it's an area of concern. And we're taking action to explicitly not support it. We made that public. Others have now joined the fray, which is terrific. And we believe it's the right answer. But yes, it's absolutely a known outcome across the board, some more acute than others, depending on the industry you're in and the size, but make no mistake, it's a big deal.
Speaker Change: Again, client orientation. Um yes it penetrates everywhere. Everyone reads and clients understand that in many respects. This is um, this is focused ultimately on them in terms of sort of what it really means. Absolutely focused on that and, uh, there are concerns about it. Therefore we're concerned about it. You saw, you know, in October of last year, the first to basically say we're not we're not going to support this uh, uh because it really doesn't support our clients, period. We we just said, no uh, you know, especially focused on the North American and the US theaters. So uh yes, it's an area of concern and we're taking action to um to to explicitly, not support it. Uh, we made that public.
Speaker Change: With others have now joined the during the frey, which is terrific. Um, and we believe it's the right answer. But yes, it's uh, absolutely, uh, a known outcome across the board, some more acute than others, depending on the the uh, the industry you're in in the size but but make no mistake. It's it's a it's a big deal.
Unknown Executive: Okay, fantastic. That's very helpful.
Gregory Case: And I want to go back to the talent question just one more time, because we've gone through, I think, you know, there's many waves in the industry where company X is hiring, and so on. I think it's great. But I'm wondering, what's Aon doing to not so much recruit talent as to train it from scratch or to grow it from scratch? Meyer, we would love to spend any amount of time with you on this. This is what I was trying to allude to before, or highlight before with Edmund as well. This is it. Moving bodies around doesn't matter.
Speaker Change: Okay, fantastic. That's very helpful. Uh, and I want to go back to the talent question, just 1 more time, because we've gone through, I think, you know, these many waves in the industry where company X is hiring, uh, and so on, I think it's great, but I'm wondering about what are doing to not so much recruit Talent as to train it from scratch or to grow it from scratch.
Gregory Case: I mean, how do you get better choice when you just move people around? You bring colleagues in, and by the way, they want this. They drive this. This is all about people, and they want more capability. They want a better answer. I mean, the example I was giving before on the construction company, this is all about they got some insight they didn't have before, provided by our colleagues, provided by a producer, and just taking someone and helping them be better. So they're phenomenal. They're driving it, but now with the seven analyzers, they're better. We had a property analyzer embedded with reinsurance content.
Myer. This is the we we would love to spend any of your time with you on this. This is what I was trying to allude to before, is our highlight before with with Edmund as well, this is it. Moving bodies around, doesn't matter.
Gregory Case: So literally a commercial company making decisions about global property placement at a structure level with literally the information that was there from reinsurance driven off of impact forecasting is like, wow, and a producer gets to see that they're better. Broker copilot, literally we're capturing information never been captured before in a comparable way, ingested so you can actually compare it real time. Our colleagues get a chance to see that, and they're like, wow, and so for us, if we can help a producer be better in real time with a client, and then with solutions, and then as they and on the on the insurance side, if we can help them in the reinsurance market do the same, this is a big deal.
Speaker Change: How do you get better choice? When you just move people around you, you you you bring colleagues in and you and by the way, they want this, they drive. This this is, this is a college. I mean, this is all about people and they want more capability. They want a better answer, they want a better. I mean, the example I was given before on the, on the construction company, this is all about. They got some insight. They didn't have before provided by our colleagues provided by a producer, and this is taking someone and helping them be better. So they're a phenomenal, they're driving it. But now with with the 7 analyzing analyzer embedded with reinsurance content, so literally a commercial company, making decisions about global property placement.
Uh, at a structure level with, with literally the information that was there from reinsurance, uh, driven off of impact forecasting is like, wow. And you know, a producer gets to see that they're better. Uh, broker co-pilot literally, we're capturing information never been captured before in a comparable way ingested so you can actually compare it real time.
Gregory Case: So for us, talent is about better clients. Talent has got to be about better client solutions. We fall short of that, we don't succeed because our clients aren't better off. So for us, we're not trying to pine on what everybody else does. And you're absolutely right. It's been tried and true. It's important for us that you understand we are different. We're not saying we're better, although we like our chances there. But we are absolutely different in how we're approaching the market and approaching talent. And it's resonating. And it's resonating and independent and connected. When you talk about connected with NFP, and it's resonating in Aon broadly in terms of how we're bringing talent in.
Producer be better in real time with a client. And then with Solutions. And then, as they interact with the market, this is a big deal and um, and on the on the insurance side, if we can help them in the reinsurance market do the same, this is a big deal. So for us Talent is about is about better Client Solutions.
Gregory Case: So hopefully that's a little bit of color commentary on how we're thinking about it. Very different.
Speaker Change: Talent has got to be about better Client Solutions, we fall short of that, we don't succeed and our because our clients aren't better off. So for us, we're not trying to Pine on what everybody else does. And uh, you're you're absolutely right. It's been tried and proved it's important for us that you understand, we are different. Uh, we're not saying we're better. Although we we like our chances there. Uh, but we are, we are absolutely different now. We're approaching the market and we're approaching talent, and it's, um, it's resonating and it's resonating and independent, and connected. When you talk about connected with NFP and it's resonating in in an aeon broadly in terms of how we're bringing talent in. So, hopefully that's a, you know, that's a, a little bit of color commentary on how we're thinking about it very different.
Unknown Executive: That was very helpful. Thanks so much. Thank you.
That is very helpful. Thanks so much.
Gregory Case: At this time, I'd like to turn the floor back over to Mr. Case for closing comments. Just wanted to say thanks everyone for joining and look forward to talking to you next quarter.
Thank you at this time. I'd like to turn the floor back over to Mr. Case for closing comments.
Just wanted to say, thanks everyone for joining and look forward to talking to you next quarter.
Unknown Executive: Ladies and gentlemen, this concludes today's event. You may disconnect your lines and log off at this time and enjoy the rest of your day.
Ladies and gentlemen, this concludes today's event, you may disconnect your lines and log off at this time and enjoy the rest of your day.