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spk02: Good morning and thank you for holding. Welcome to Aon PLC's third quarter 2021 conference call. At this time, all parties will be in a listen-only mode until the question and answer portion of today's call. I would also like to remind all parties that this call is being recorded. If anyone has an objection, you may disconnect at this time. It is important to note that some of the comments 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. Information concerning risk factors that could cause such differences are described in the press release covering our third quarter 2021 results, as well as having been posted on our website. Now it is my pleasure to turn the call over to Greg Case, CEO of Aon PLC.
spk08: Thank you, and good morning, everyone. Welcome to our third quarter conference call. I'm joined by Krista Davies, our CFO, and Eric Anderson, our president. As in previous quarters, for your reference, we posted a detailed financial presentation on our website. We want to begin by thanking our 50,000 colleagues. 2021 continues to be a remarkable year, and as a result of our colleagues' hard work, dedication, and perseverance, we've delivered outstanding results in Q3 and year-to-date. This performance is an extraordinary accomplishment and a direct result of their efforts, working together as one firm to bring the best of Aon to clients. We're also proud to report that our client feedback continues to be outstanding, as net promoter scores are at a five-year high. Additionally, Aon's colleague engagement is at the highest levels we've seen over the past decade, consistent with top quartile employers. This client feedback and college engagement are directly reflected in our firm's sustained momentum and financial performance. In deep appreciation for all that our colleagues do for our clients and our firm, we were excited to establish in Q3 the A&United Growth Ownership Plan. This unique program rewards every colleague for the stock-based award to share in the current and future success of our firm. And we're thrilled to recognize and support our colleagues in this way. Overall, as we reflect on Q3 in the first nine months of 2021, our momentum defined by client delivery, colleague engagement, and financial results is exceptional. Even more promising is what we see in the opportunity ahead. Our conversations with clients reinforce substantial and growing unmet demand to support them in making better decisions to protect and grow their businesses in an increasingly volatile world. This opportunity to create new markets to serve our clients is the catalyst for our innovation agenda and the source of greater momentum in our business. Focusing on financial performance in Q3, our global team delivered outstanding results across each of our key financial metrics, including 12% organic revenue growth, notably our strongest growth in over a decade for two quarters in a row, driven by mid-single-digit or greater organic revenue growth from every solution line, highlighted by particular strength in health and commercial risk at 16% and 13% respectively, and adjusted EPS growth of 14%. Year-to-date, our 9% organic revenue growth reflects mid-single digital greater organic growth from three over four solution lines. Our AM United strategy is delivering significant momentum in every solution line with net new business generation and ongoing strong retention. We also saw double-digit growth for the second consecutive quarter in the more discretionary portions of our business, such as transaction liability, human capital, and project-related work within commercial wealth solutions and health solutions. We continue to expect mid-single-digit or greater organic revenue growth and margin expansion in the full year 2021, 2022, and over the long term, as we continue to win share in our core business and execute to further expand our total addressable market. As we move forward, we continue to be guided by our and United blueprint to ensure we're operating as a fully integrated global team capable of delivering the best of our firm in every local market. Today, we'd like to highlight how the core tenants of our blueprint drive momentum and deliver greater future opportunity. Specifically how delivering and United is enabling core new business generation and fueling stronger retention. How I am business services is building capability for colleagues and translating to better service for clients. Our ongoing focus on innovation at scale is accelerating the development of new solutions to serve unmet demand. And our commitment to inclusive people leadership has resulted in the highest levels of engagement and retention in over a decade. First, executing Ann United is delivering net new business generation and ongoing strong retention by continuing to engage clients across all their needs. with the entirety of our firm. This strategy has been built over many years and enables extraordinary solutions for clients, resulting in Aon winning more, growing our book of business with new and existing clients, and in turn, delivering exceptional results to shareholders. Second, we've invested heavily in Aon Business Services, or ABS, over the past five years, which now represents the core operating platform that spans the entirety of the firm. ABS centers of excellence have and will continue to grow margins by driving efficiencies across all solution lines. Equally important, ABS capability enables us to improve client service delivery and scale innovation globally much faster, driving higher organic growth. The ABS model is redefining what we're capable of delivering to clients and improving the way we work. Third, we continue to accelerate innovation at scale. Aon is delivering innovative solutions to our clients by helping them navigate new forms of volatility, build resilient workforces, access new forms of capital, and address the underserved through digital solutions, all of which substantially grow our total addressable market. This has been demonstrated, for example, in intellectual property-backed financing, a first-of-its-kind option created and enabled by Aon's IT solutions teams. Given that intellectual property represents 80 plus percent of the value of the S&P 500, we believe the entire IP category has the potential to be a hundred billion market over time. Other categories that represent new addressable markets in the tens of billions include cyber, climate, supply chain, and digital client solutions, led by our exceptional team at Coverall. Fundamentally, this opportunity to serve substantial new addressable markets is driven by client demand. At Aon, we relentlessly focus on the voice of the client, and we're hearing consistent client feedback about the need to make better decisions around long-tail risks. For example, we're currently getting this guidance from the almost 3,500 clients that are currently participating in our regional Aon Insight Series. And it's also being reinforced by two pieces of proprietary research that we recently released. Every two years, Aon conducts our global risk management survey. And the latest report released three days ago was informed by insights from more than 2,300 clients across 16 industries spanning public and private organizations from 60 countries around the world. With more emphasis and reliance on technology, cyber risk topped the list as the number one current and predicted future risk globally, its highest rank since the inception of the survey. The top 10 risks also reflect the impact COVID has had on organizations as they needed to navigate volatility with better and faster decisions. We're seeing organizations shift focus from event-based to impact-based risk assessments, reflecting the shift in mindset following the systemic impact of the pandemic. Aon also recently released results of a survey focused on 800 C-suite leaders and senior executives in the US, EU, UK, and Canada to understand how organizations are preparing for and responding to the current environment. We found that today senior leaders are more astutely risk aware than ever before, but remain confident to take on calculated risks and investments that build resiliency of their companies. As we stated before, the approach to risk strategy has shifted from being generally defensive and risk averse to more opportunistic, taking a holistic, integrated view that they seek solutions to address these challenges. There is great respect for the need to defend their businesses, but that's accompanied by a desire to find solutions that help them win, as the IP financing example highlights. In this environment, we're uniquely positioned to deliver data-driven insights to help our clients make better decisions that grow their businesses. Fourth and finally, we continue to see tremendous impact of our commitment to inclusive people leadership. Voluntary attrition is down substantially versus our 2019 baseline, and our quarterly pulse of colleagues shows that we continue to enjoy all-time high engagement levels. Many examples highlight our talent, focus, and priority, including our commitment to Aon apprenticeship programs and a $30 million investment to create 10,000 new roles in the apprenticeship community. Our investment in talent development, as over 14,000 Aon colleagues around the world have participated in training programs in the last nine months alone, and the announcement of the Aon United Growth Ownership Plan. In summary, our global AOM team delivered the best third quarter results in over a decade. Our AOM United Blueprint, powered by our capability in AOM Business Services, combined with significant investment in new and growing categories for addressable client demand, reinforces the momentum we have today and offer even greater potential over the next few years. The result is clients that are better informed, better advised, and equipped to make better decisions. Now I'd like to turn the call over to Krista for her thoughts on our financial results and our long-term outlook for continued shareholder value creation. Christa?
spk01: Thanks so much, Greg, and good morning, everyone. As Greg highlighted, we delivered continued progress for both the quarter and year-to-date. Through the first nine months of the year, we translated strong organic revenue growth into double-digit adjusted operating income and adjusted earnings per share growth, building on our momentum as we head into the last quarter of the year. As I further reflect on our performance year to date, as Greg noted, organic revenue growth was 12% in the third quarter and 9% year to date, our strongest organic revenue growth in over a decade. We saw strong global macroeconomic conditions in the quarter, though we continue to assess three factors, as we have since the beginning of the pandemic. Those factors are the virus and vaccine rollout, including the potential impacts of new variants, government stimulus, and overall GDP growth. These macroeconomic conditions do impact our clients and various areas of our business. Considering the current outlook for these factors, we continue to expect mid-simple digital greater organic revenue growth for the full year 2021, 2022, and over the long term. I would also note that total reported revenue was up 13% in Q3 and 12% year-to-date, including the favorable impact from changes in FX rates driven by a weaker U.S. dollar versus most currencies. Moving to operating performance. First, I want to speak to the impact of our previously communicated repassioning of expenses as compared to COVID impacted expense in 2020, which I'll describe before any 2021 growth. As we've described, the timing of expenses is changing year over year, such that $65 million of expenses moved into Q3 from Q4. This impact is due to the actions we took and highlighted in 2020 as we reduced discretionary expenses to be prepared for the impacts of COVID-19 and potential macroeconomic distress. In Q3, this repatterning negatively impacted margins by approximately 240 basis points, resulting in Q3 operating margin contraction of 30 basis points. Excluding this impact, margins would have expanded by 210 basis points in Q3 and 240 basis points year to date. A second key factor impacting adjusted margins has been the relative speed of revenue growth and investment. In Q3, excluding the impact of the repatterning, our strong organic revenue growth significantly outpaced expense growth, similar to Q2. We continue to evaluate investments using our return on invested capital framework in the areas of talent, AOM business services, and innovation to enable long-term growth. we expect that these areas of investment will continue to ramp up significantly during Q4. In addition, we anticipate continued resumption of T&E and modest increases in real estate as more colleagues return to the office. Collectively, the headwind from expensory patterning and tailwind from slower investment as compared to revenue growth are the main factors driving 30 basis points of margin contraction in Q3 and 20 basis points of margin expansion year to date. Looking forward, as we've said historically, we expect to deliver four-year margin expansion for 2021 and over the long term. Turning back to the results in the quarter, we translated strong adjusted operating income growth into adjusted EPS growth of 14% in Q3 and 16% year-to-date. As noted in our earnings materials, FX translation was a favorable impact of approximately $0.02 per share in Q3 and $0.24 per share year-to-date. If currency to remain stable at today's rates, we would expect an instant impact in Q4. Excluding the costs associated with the termination of the combination with Willis-Tiles-Watson of related costs, our performance and outlook for free cash flow in 2021 and going forward remains strong. Free cash flow decreased 40% year-to-date to $1.1 billion, as strong revenue growth was offset by the billion-dollar termination fee payment and other related costs. Of the total $1.363 billion of termination fee and other related costs, a pre-tax amount, the billion-dollar termination fee was paid in Q3, and approximately two-thirds of the remaining charges were paid in 2021, with the majority of the balance paid in 2022. We continue to expect to drive free cash flow over the long term, building on our long-term track record of 14% CAGR over the last 10 years, based on operating income growth, working capital improvements, and reduced structural uses of cash enabled by Aon Business Services. As Greg highlighted, Aon Business Services not only drives efficiencies, but also enables revenue opportunities and innovation at scale. As an example, through our integrated vendor management system in the US last year, we were able to ensure that 5% of addressable vendor spend was with diverse suppliers, which is two times higher than the Fortune 500 average. In addition to being a key initiative for Aon as part of our overall ESG strategy, this is also a way we can have an even bigger impact on what we deliver for clients in an Aon United way. In the third quarter, we had an opportunity to engage with a biopharmaceutical client looking to establish a supplier diversity program as part of their broader inclusion and diversity strategy. Given our demonstrated supplier diversity expertise, our global spend management team and human capital colleagues came together to forge a new innovative solution based on this client's emerging need, which included establishing government structure and conducting research on peer and industry norms. Given our outlook for long-term free cash flow growth, we expect share of purchase to continue to remain our highest return on capital opportunity for capital allocation. In the third quarter, we repurchased approximately 4.4 million shares for approximately 1.3 billion. We also expect to continue to invest organically and inorganically in innovative content and capabilities to address unmet client needs. Our M&A pipeline, centered around the four areas that Greg described, is focused on bringing innovative solutions to our clients' biggest challenges, delivered by the connectivity of Aon United. I would also note that on October 1st, we closed the previously announced sale of our Atari Exchange business to Alight. In 2020, the retiree exchange generated 176 million of revenue and it is a predominantly Q4 business. Turning now to our balance sheet and debt capacity. We remain confident in the strength of our balance sheet and manage liquidity risk through a well-laddered debt maturity profile. In Q3, we issued a billion dollars of senior notes as we return closer to historical leverage ratios while maintaining our current investment grade credit ratings. Interest expense in the fourth quarter is expected to be approximately 85 million, reflecting our increased debt levels. Over the long term, we expect to return to our past practice of growing debt as EBITDA grows. Further, I'd note that fourth quarter is our seasonally strongest quarter for free cash flow generation, and we intend to allocate this cash to our highest and best uses, based on return on capital, which remains share repurchase. In summary, strong top and bottom line performance for both the quarter and year to date reflect continued progress and momentum as we enter the last quarter of the year. We believe our disciplined approach to return on invested capital combined with expected long term free cash flow growth will unlock substantial shareholder value creation over the long term. With that, I'll turn the call back over to the operator and would be happy to take your question.
spk02: Thank you very much. Now we'll begin the question and answer session. If you would like to ask a question, please press star 1. Please unmute your phone and record your name clearly when prompted. Your name is required to introduce your question. To withdraw that request, press star 2. One moment please for the first question. Our first question now is from Elise Greenspan with Wells Fargo. Ma'am, you may ask your question.
spk03: Thank you. Good morning. My first question is on the ramp-ups that you were talking about, expenses in the fourth quarter. Krista, I think you used the word significantly when talking about that. Just trying to... expand on the ramp up you're expecting from investments, T&E, and real estate? And tying into that, should we expect your full-year margin expansion to be at or better than your 10-year average, which I believe is around 90 basis points?
spk01: Thanks so much for the question, Elise. As you mentioned, over the last 10 years, we've delivered 890 basis points of margin expansion, so approximately 90 basis points a year for 10 years. And we will deliver a full year margin expansion for the full year 2021. As I mentioned, in Q4, we will continue to invest meaningfully in talent, in Aon business services, and in innovation to enable long-term growth. And we expect the expenses associated with these investments will ramp up during Q4 due to the terrific opportunity we see ahead. And so, as I mentioned, Elise, we expect full-year margin expansion. We don't give specific in-year guidances for that, but we have delivered margin expansion for the last 10 years of 90 basis points a year.
spk03: Okay, and how any other colleagues can say just in terms of the – like were you guys investing in the third quarter? That is significantly. Was there some going on in the third quarter just in terms of sizing the ramp up that maybe we could see sequentially?
spk01: Yeah, so what I did say about Q3 is our strong revenue growth significantly outpaced our expense growth. And so these investments are really going to increase more in Q4 than Q3.
spk08: And Lisa, I would just, just to reinforce, as you think about margin over time, Krista Pegg did exactly right. You think about sort of our historical performance, it's been what it's been, and we fully expect that continues in the future on margin improvement, as we said, in, you know, next year and the following years and over time. I would just highlight, though, there has been you know, continue increasing ability to invest in growth and build momentum in the business in very specific areas that we believe are really reacting to client need and what they're essentially saying that they've really got to, you really need to see new solutions on. So I do want to reflect that level of increased investment. And maybe, Eric, there are a couple of specific areas you might just want to highlight just so Elise gets a sense on sort of the kinds of things we're able to invest in and still maintain margin improvement.
spk04: Sure, Greg. Maybe a couple of ways to answer the and make the comment. One is going back to the question around T&E, you know, we've been doing these client impact series events over the last couple of quarters, and they've drawn thousands of clients, right? And we've been able to do it virtually, which allows us to bring global capability, global speakers, global insight to any region and share best practices around what our clients are thinking about around the world has been really helpful. and really one of the benefits of using the technology in a way that we're going to keep using going forward. So the historical model of doing a roadshow, putting people in conference rooms around city to city to city, right? Our ability to do it in two hours and talk to 4,000 clients at the same time is material. So that's just one area. Chris, I just didn't want to lose that point because it has been such a great impact for us. And the second Greg is we continue to see real growth opportunities in the business, really in a couple of different areas, right? First on the data and analytic area, continue to invest in our digital space, our modeling and analytic capability to help clients see what's coming and understand better. You know, you mentioned in your opening comments around, you know, C-suite people are now risk aware. And by risk aware, that means they want more information, right? And so we need to have more analytic capability, more modeling capability. So we're investing there. And then you've got your traditional areas where we're seeing great growth, right, whether it's M&A services, construction, you know, health benefits, those areas where we really do see that need, you know, underneath the AM United platform of integrating those teams is really something. So there's a lot out there. We could talk for days on it, but, you know, just to make those comments off the question.
spk03: Thank you. And then one last one. The tax rate was, on an adjusted basis, was just under 24% this quarter, so a little bit higher than where it's been trending. If you could provide any color there, and then any implications that you can share from the global minimum tax?
spk01: Yeah, so, Elise, thank you so much for the question. We're not going to give guidance on tax rate going forward, but if we look back historically, exclusive to the impact of discreets, which can be positive or negative at any one quarter, our historical underlying rate of the last four years was 18%. And what you saw in Q3 was a tax rate slightly higher with an unfavorable discrete item. And, you know, in terms of the global minimum tax, obviously we're tracking this very closely and monitoring, et cetera, and the implementation of that has not been worked out yet. And as we learn more, we look forward to sharing with you, Elise.
spk03: Okay, thank you.
spk02: Thank you. Our next question is from Charlie Lederer with Wolf Research. Sir, your line is open.
spk00: Hey, good morning. I'm dialing in for Mike Zaremski this morning. A couple of questions on cash flows. Should we expect the net loss on a GAAP basis to help reduce cash tax payments over the next 12 months or so? And I'll see noted in the slide deck that about the $363 million that will be paid at 21 Have you disclosed how much of that has been paid to date?
spk01: So maybe I'll take those in reverse order, Charlie. Thanks so much for the question. So we had $1.363 billion of expenses that were adjusted out of Q3, a billion dollars in termination fee, and $363 million of charges, which is the lower end of the range we provided. We provided a $350 to $400 million range. We paid the billion-dollar termination fee in Q3, and two-thirds of the $363 million in charges will be paid by the end of 2021, and the remaining third will be paid in 2022. And then I think your first question was around sort of the free cash flow. We do expect to generate strong free cash flow this year. and we expect free cash flow over the long term to be growing double digits. One of the things I'd note, Charlie, is if you start with the $2.6 billion of free cash flow straight off the gap cash flow statement in 2020, that's cash flow from operations, less capex, that equals $2.6 billion. You can grow that double digits, Charlie, and get yourself to a good starting point for 2022 free cash flow. And then I think you're also really asking about the tax deductibility of the billion dollars, the $1.363 billion, in fact. And we have said that's a pre-tax number. We have not disclosed the details, the tax deductibility of it.
spk00: Okay, thank you. And then some of your peers talked this quarter about significant rate increases in cyber insurance. Is this helping your organic growth? And can you talk about what you're seeing there and whether – There's more of a supply-demand imbalance going on now.
spk08: Maybe, Charlie, I'll start with that. I'd love to get, Eric, your comments on this. George, let's start overall. When we're asked about rate, we always come back to market impact. That's more important than anything else. Literally, you know, how clients, you know, really endure kind of what's going on in the broader marketplace. And remember, our role in life is to help them actually model, understand analytics and all the pieces and sort of create the best set of solutions for them in the face of market impact. And we reflect prices, you know, modestly, a modest impact on us over the course of the quarter and the first nine months. But generally, you know, you can pick the one-off pieces. But overall, we're looking at how to help clients manage that. But, Eric, on the day-to-day, how would you reflect it?
spk04: Yeah, Greg, I think I would say it in that, you know, maybe a little bit of what you said to pick up on it. You know, the clients make decisions based on their risk appetite, budget capacity, insurance options in the marketplace, et cetera. And each product essentially has its own dynamics. Right. It has its own claim trends. It has terms and conditions, retention, deductibles, supply, demand, which markets are competing, et cetera. So, you know, we're coming out of probably a 24 to 36 month price increase environment. But we're seeing a deceleration across the globe on the major products, products. You mentioned cyber in particular. It's important to put that in scale in terms of the size and reach of the entirety of the insurance marketplace. So it gets a lot of attention over the last couple of days, I've heard as well. But the reality is it's one product in an entire risk management portfolio that clients are managing against. And a lot of the energy that's going into cyber today is actually going into the consulting aspect of it. The risk management part or the post-event part, as opposed to just the risk transfer, as the market is trying to get its right balance as to what is, you know, what's the right trading price, if you will, for risk transfer and what's covered in it and the like, based on all the activity we've seen in ransomware and other things over the last couple of years. But keep it in context, because overall, the size and scale of what our clients are doing around the world They're trying to make tradeoffs and choices based on market conditions that have been more favorable to insurers than clients over the last couple of years. But ultimately, our role in that is to help them using our expertise, our analytics, our modeling capability to help them make those choices. But I would just say I would keep cyber in context relative to the entirety of the marketplace.
spk00: Great. Thank you, guys.
spk02: Thank you. Our next question now is from Jimmy Bowler with JP Morgan. Sir, you may ask your question.
spk05: Hi, good morning. So first, I just had a question on employee retention. You've lost a number of high-profile employees during the Willis process. It doesn't seem like it's impacted your results, though. So wondering if you could just talk about employee retention overall. and whether you expect a little bit of a slowdown in results just we just haven't seen that yet but you might be expecting that over the next few quarters because of it uh jimmy may start with a perspective listen as you heard in my opening uh quite the reverse in terms of
spk08: uh what we look at and what we see every day you know obviously uh you know i mentioned in the in my opening comments our um our you know our voluntary attrition is sort of we pegged it against 2019 and we're way ahead of that of that baseline so actually we've we've gotten stronger over time very very positive and then you know most important our engagement and we do a full survey very frequently um quarterly and sometimes even monthly around where we are and we literally have the highest engagement we've had in the last decade and you got to understand we're We're looking at, you know, as we think about our colleagues, better ways to help them serve clients, which means it's much more focused on their expertise and their development, their insights. You know, and as clients achieve their goals and what they're trying to do, our colleagues go alongside them, and that creates a very unique environment, and that's what Aon is. And as a result, you know, we're much more, as I said, focused on talent development, some of the things I talked about. in my comments reference that and so we just uh you know we feel tremendous momentum with our colleagues around the world uh and that's borne out in our performance uh both our top line performance and our bottom line performance uh and as i said before in our nbs scores and that promoter scores so from our standpoint uh you know we are in a very privileged position we feel uh terrific about where we are what our what our colleagues are able to deliver around the world And as both Eric and Chris and I have all highlighted, feel even more optimistic about what the potential holds in terms of where we are. But listen, talent is literally what we do every day, what we're focused on every day. I want to get Eric's and Chris's input on this as well. Eric?
spk04: Yeah, thanks, Greg. And look, I would just say from a From your direct question of are we losing senior people, the answer is you can't track it based on the snippets of the insurance industry rags that print. We feel great about our team and feel like where we are investing for the future is critical to how we are positioning our assets. We also have something, as you think about our AM Business Services platform, it's an opportunity for us to provide professional service consistent standards around the world and actually leverage our innovation in a way that i don't think anyone else in our industry can do and so as we focus our investment on talent we're focusing on where we can grow where we see growth opportunities we're also focusing it to make sure we've got the depth of service teams as we do and have been building our bench over many years to make sure we can do that so you know feel really great about where we are but having that abs platform is a game changer for us because it actually allows us to scale our innovation, provide the level of service that our clients need, and really target our growth, our investments in growth and talent into areas where we can make an outsized client impact.
spk05: Okay. And then on the timing of expenses, you did mention and you, I think, mentioned before as well the shift in expenses towards 2Q and 3Q this year. As we think about expenses and margins in 2022, should that be consistent with 2021 or would it be more consistent with pre-pandemic levels?
spk01: Great question. So 2021 is the right patterning of expenses for each go-forward year, Jimmy. So you should use 2021 as your right patterning.
spk05: Okay. And then just lastly, I think you've obviously benefited from lower T&E spending in the near term, and I think at some point that comes back. But as you think about your expenses longer term, are there sort of long-term benefits from the pandemic, whether it's lower real estate footprint or less travel going forward, at least through the next few years? How do you think about sort of how the pandemic affects your margin trajectory and expenses?
spk01: Thanks so much for asking the question, Jimmy. It's a great question. We're really focused on learning the best lessons in how we've been serving clients well over the last 18 months. bringing global expertise and teams to serve their most important issues via video globally, as Eric described, with our client insight series, over 4,000 clients served virtually. And it's creating more opportunities for colleagues to be included globally. And we're utilizing this to bring the best talent and best expertise to clients. And so for us, this is really about the future of work and how we position Aon in a new, better scenario. So serving clients with the best talent and expertise providing employees with flexibility and ensuring that they're productive, and having a diverse and inclusive workforce. But, Eric, you're at the front and center of this with clients every day. What would you add here?
spk04: Yeah, Krista, not much other than to say it has really provided an opportunity for us to unlock our global talent in a way that we can bring it to a client that historically was just more challenging because of logistics. When a client is – if it's a U.S.-based client and they want to talk about something that's happening in France, you just pop up the French team, and they can go direct to it and have that conversation. So historically, that would have come from the team in France to the account exec in the U.S. and would have been talked about in the third person as opposed to just unlocking the global team. And it does a couple of things for us. One, it shows the power of the global company to a client. It also makes connections among our teams. in a way where they're learning firsthand as well and so can repeat that learning. So you're absolutely right on everything you said, Krista, before. But there's an ability for us to really see and use the global connectivity in a way that historically had just been harder to do. and do it on a more frequent basis. And we have found over the last 18 months that the clients have really valued that access, being able to get right to the point of the expertise and be able to bring it and deliver it in a really easy way for the client to digest it and really build those relationships as well. So we definitely are going to take those forward. That has been a real value part for us and, you know, something that we're going to bake into the model going forward. Okay. Thank you.
spk02: Thank you. Our next question now is from Mayor Shields with KBW. Your line is open, sir.
spk06: Thanks. First, just a question if I can. What are you telling your clients about the persistence of current inflation in the U.S.?
spk08: So overall, Meyer, in terms of – I just want to make sure I – so just what we're counseling our clients about it, or is that the question?
spk06: Yeah, pretty much, just because I think that your insights are going to be tremendously valuable. I'm just wondering what the actual viewpoint is. Go ahead, Kristen.
spk01: Yeah, I mean... Mayor, this is such a great question because wage inflation is certainly real, and our human capital business is hearing directly from clients about it and seeing in our compensation surveys and data where compensation increases. And compensation is averaging increases in the 2% to 12% range depending on the role. And as a result, our teams are spending a lot of time with clients on strategies to deal with this. Areas like total rewards and resource allocation, organizational benchmarking and readiness, and the development of long-term talent strategies are really topical right now. Not surprisingly, we're seeing a lot of demand in our human capital business, and it's reflected in the double-digit growth of that business we've seen over the course of this year.
spk06: Okay, that makes sense. Does it go beyond compensation-related inflations?
spk01: that's the main area we're seeing it in the labor area. Are there other areas you're thinking about there?
spk06: Like the general, people are calling it financial inflation, sort of the all-item PPI.
spk01: Yeah, I mean, we're certainly, I mean, one of the things we would say more broadly, Mayor, is inflation is a positive thing for Aon's business overall. If you think about, you know, you are insuring assets and whether the assets are corporate revenues or employment levels or commercial property assets, inflation is generally a tailwind for our business.
spk06: Okay, perfect. And then if I can follow up. With regard to the stock ownership plan for colleagues, are we going to see any associated stock issuance associated with that? Does that offset the share of purchases?
spk08: Well, again, just to start with the overall plan, and then, Christy, we talked to the mechanics of this. I do want to just highlight what this is about. This was last year. It has been amazing. It has been a wonderful opportunity for all of our colleagues around the world to participate and take part the success of the firm. But the mayor actually goes well beyond that. When you talk about financial wellness and understanding, every colleague at Aon has a fidelity statement now. Every colleague at Aon actually has a piece of the firm, can watch and see what happens, engage in a discussion around how this works, the mechanics of it, all the nuances of it. It's really, it's been fantastic. And in essence, in many respects, they're getting a chance to see the firm in a way they haven't seen it before. So beyond kind of the, you know, the aspect of sort of the wealth creation aspect of it, it really is the financial wellness aspect of it has been absolutely fantastic. And then obviously in the context of what we're doing, we looked at this investment in our colleagues, like we look at all investments from a return standpoint, and we thought this was a phenomenal one. And by the way, our high expectations have been exceeded. The reaction has just been spectacular.
spk01: And then maybe just from a share point of view, we obviously are, you know, issuing, you know, options as part of this. But as we think about, you know, utilizing our cash, you know we run the firm based on return on capital, cash on cash returns, and our highest return on capital opportunity across Aon remains share or purchase because we value the firm on a discounted cash flow basis. It values us substantially above where we're trading today. and therefore the return on capital or share of purchase continues to be the highest investment opportunity across Aon. And so we're investing in share of purchase because of the return, not to offset any dilution.
spk06: Okay, understood. Thank you so much.
spk02: Thank you all. Again, to ask a question, please press star 1 to join our queue. Our next question now is from Weston Bloomer from UBS. And, sir, your line is open.
spk07: Hi, good morning. My first question is on the investment in talent and what that could potentially mean for organic growth. More specifically, just in the second half of the year, because it looks like you'll probably come off a difficult comp in second half 2022. So more curious, as you bring on new talent historically, what have you seen in terms of a ramp up in terms of, you know, getting the full efficiency or your broader expectations there?
spk08: Well, maybe I'll start just broad view, and again, all three of us can comment on this. We stepped back. Essentially, we talked about mid-single-digit or greater organic revenue growth across all of our solution lines. And that's where we are, and that's where we have achieved and continue to achieve, and that's what we're anticipating for next year, the year after, and the coming years. So look for that. That's the benchmark in terms of where we are. We really don't look at it in the same way as maybe others describe it, this idea of quarter to quarter, add a person, get a return. We really look at overall how we support our colleagues, the talent strategy of our firm, how we both bring them in and develop with them, but also how we develop our current set of colleagues who come in, and are part of Aon over time. And that's sort of new hires, but it's also, I think, about our apprenticeship program. Our apprenticeship program has been an amazing investment and opportunity over the last number of years. We started this in 2017, as an example. In Chicago, we now have 50 employers engaged in this apprenticeship network with 1,000 apprentices in Chicago. We've made this investment across North America. We've copied what's been done across Europe. We've been recognized, even fortunate to recognize sort of what we've done in terms of sort of the impact this is going to have. And all I'm trying to highlight, Wes, on this topic of talent, it's central to Aon. And we develop it in a very specific way. I talked about 14,000 Aon colleagues in the last nine months alone really going through training programs that help our colleagues continue to evolve as professionals to help serve clients in an environment which has become more complex. That is the way we approach the market on all angles and all aspects with full expectation we're going to achieve results, you know, mid-single digit or greater. So it's not kind of up, down, or different. It's just that's what it's going to be, mid-single digit or greater. And then we see opportunity to, you know, continue to expand with these new addressable markets we talked about. So that's philosophically how we think about it. It isn't kind of the ramp up, ramp down, ramp up, ramp down that others, you know, often talk about. Ours is really mid-single digit or greater over time. But Eric, thoughts on it from your standpoint as you think about this from a talent perspective?
spk04: Yeah, maybe a different angle on it, too, is that when you think about our AI United model and how we actually interact with clients, essentially having a client leader who can bring all of the capability of the firm to a client, whether it's on the risk side, whether it's on the wealth side or the health side, et cetera, that model is a team-based model. So it's less about hiring a person and then getting an immediate return. It's really around investing in the capability so that as we interact with clients, we can bring to them either existing solutions that we have today or as the teams work together and create new solutions together where you're matching human capital and risk or reinsurance and help to try and create new ways to unlock value. That's less about I need five new people to get five new things. It's more around how do you invest consistently over time so that you have the expertise and you have the team-based culture that allows you to deliver that capability to a client in a way that nobody else can. That's what we're after, and that's what we've been building on over the last couple of years. So as Greg said, it's less about head count up, head count down. It's around do you have the right culture, do you have the right expertise, and the right planning process so that we're able to interact with a client in a way where we can deliver something no one else can. That's the play. Krista, anything you'd add?
spk01: Yeah, look, just to build on Eric's point about investments, we've invested in Aon Business Services and specialized teams, and we've engineered a firm that's capable of sustained long-term organic growth and margin expansion at any point in the cycle, as we've demonstrated over the last decade.
spk07: Got it. That makes sense. And just as a follow-up, and I may have missed this, did you provide a cover wallet growth in the quarter? I think you provided double-digit last quarter, so I'm curious how that's changed.
spk08: We didn't provide a specific growth call-out. I just wanted to highlight sort of this team that's been exceptional. It really is the perfect example of what Eric and Chris had just talked about. It is looking at opportunities in digital and what we can do to help serve clients more effectively. CoverWallet is just an amazing, amazing firm, and we brought them into – the Aon family, and together they've made our global firm better. And hopefully as we've invested in that capability, they've become stronger over time. And so we're seeing substantial impact, not just in what would have been defined as the core business they came in with, but really how they've helped us grow businesses around the world. And we see this as really the tip of the iceberg and what the opportunity could be driven by this team and our broader team around the world.
spk07: Great. Thank you for the answers. Mm-hmm.
spk02: Thank you very much. I would now like to turn the call back over to Greg Case for closing remarks.
spk08: Thanks very much. Appreciate it. Thanks, everyone, for joining the call. We always appreciate it and look forward to our next discussion. Thanks very much.
spk02: The conference is now concluded. Thank you for your participation. You may please go ahead and disconnect.
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