The operator welcomes listeners to Aon plc's Second Quarter 2024 Conference Call, reminding them that the call is being recorded and may contain forward-looking statements. CEO Greg Case, CFO Christa Davies, and President Eric Andersen are present, along with incoming CFO Edmund Reese. They will provide prepared remarks and discuss the company's 3x3 plan, thanking colleagues for their work and welcoming new colleagues from NFP. Edmund will also share some initial observations before officially taking over in Q3.

Edmund Reese, the new CFO of Global Aon, is excited to join the team and sees great potential for growth in the company's 3x3 plan. He is also looking forward to meeting investors and discussing the company's financial performance. The CEO, Greg Case, mentions a recent success in Ukraine where Aon's united approach allowed them to provide war risk insurance in a previously unavailable market.

The company has worked with the US and Ukranian governments to create a solution that provides insurance and reinsurance capital to Ukrainian insurers, bringing in $350 million of new capital. This innovative structure helps with economic recovery and rebuilding during the war and long-term investments. In the second quarter, the company delivered 6% organic revenue growth and added NFP, resulting in 18% total revenue growth and increased margins. Year-to-date, the company has delivered 5% organic revenue growth and 11% total revenue growth. In the Commercial Risk solution line, there was 6% organic revenue growth, with strong growth in EMEA, LatAm, and North America.

In the second quarter, Aon saw growth in exposures and flat pricing, resulting in moderately positive market impact. Their M&A services business had a modest positive impact, with a strong pipeline for future growth. Reinsurance had 7% organic revenue growth, driven by strong performance in treaty and health solutions had 6% organic revenue growth, with strength in core health and benefits. Wealth Solutions had 9% organic revenue growth, driven by pension derisking and retirement. NFP's contribution was consistent with Aon's performance. Overall, Aon is pleased with their top and bottom line growth and NFP's early progress is on track or ahead of expectations, with four key growth and value creation opportunities.

The paragraph discusses the progress made in integrating NFP into Aon, with a focus on independent and connected teams, strong revenue growth, successful M&A operations, and expected bottom line growth. The overall goal is to deliver superior value to clients, colleagues, and shareholders. The writer also thanks Christa for her leadership and partnership in this process.

The speaker reflects on their time at Aon and their excitement for the potential of the 3x3 plan. They mention the exceptional results of the second quarter, with 6% organic revenue growth and the impact of the NFP acquisition. They also discuss their progress with NFP and their expectations for future revenue growth. They state that they are on track to achieve deal synergies and reiterate their previous guidance for the deal.

The company has seen a decrease in voluntary colleague attrition and has delivered strong operational improvement with increased operating margins. This is due to revenue growth, portfolio mix shift, efficiencies from Aon Business Services, and restructuring savings. The company is making progress on its Aon Business Services strategy and has seen $45 million in restructuring savings so far, with an expected $95 million in savings by 2024. These savings are expected to contribute to margin expansion and will fall to the bottom line. The company is on track to achieve $100 million in savings by 2024 as it continues to accelerate its plans for Aon Business Services and its overall business.

Aon expects to see an increase in adjusted operating margins over the full year and in the long-term through revenue growth, portfolio mix shift, and efficiencies from Aon Business Services. They anticipate a 30.6% adjusted operating margin growth by 2025, with a slight decrease in fiduciary investment income in the second half of the year. Adjusted EPS and free cash flow have also seen growth, but have been offset by higher expenses related to the NFP acquisition and integration. However, Aon remains confident in their strong free cash flow outlook based on expected operating income growth and a long-term opportunity in working capital.

In the next few years, NFP is expected to contribute significant amounts of free cash flow, allowing for continued investment in the company through acquisitions, divestitures, and share buybacks. The company has a successful track record of balancing these investments to optimize their portfolio and generate high returns. Share buyback will likely remain the highest ROIC opportunity, with $1 billion or more expected in 2024. NFP's M&A pipeline is focused on their high priority areas and they have already completed 14 acquisitions in 2024. They are on track to meet their goal of $45 million to $60 million of EBITDA per year through M&A.

The company is pleased with their financial results and looks forward to building on their established track record and executing against a strong pipeline to drive future growth and value creation. They will continue to actively manage their portfolio and assess capital allocation decisions based on ROIC. They expect their credit ratios to be elevated over the next 12-18 months but are confident in the strength of their balance sheet. The company remains focused on their 3x3 plan and driving results in 2024 and over the long-term. The call was then opened up for questions from analysts.

In the past quarter, NFP has been a significant factor in the company's growth, but even without it, there was still a 6% growth in the Commercial Risk segment. This growth was driven by strong net new business generation and retention across all major geographies. The company's 3x3 plan, which focuses on better understanding client needs and providing distinctive solutions, has contributed to this growth and is expected to continue in the next few years. The quarter-to-quarter performance may vary due to external factors, but overall, there was growth in exposures and positive market impact. M&A services also had a positive impact in the quarter.

The speaker discusses the team's strong position to take advantage of the growing pipeline and highlights the consistent new business and retention. They also mention the progress made in hiring for key specialty areas like energy and construction, and emphasize the importance of investing in the best talent and providing them with tools and analytics. This ties into their overall plan for growth and the $1 billion investment in ABS.

In the paragraph, the speaker discusses how matching new talent with existing talent and new tools can improve the client experience at Aon. They mention the success they have seen at recent client events and how the risk analyzers and access to global capital have helped drive retention and new business wins. The speaker also addresses the higher than usual tax rate in the second quarter, attributing it to a mix of income and unfavorable discretes.

The speaker notes that the rate of discrete events can fluctuate from quarter to quarter, but it is important to look at the full year. They also mention that NFP is on track to meet their expected EBITDA for M&A, with a strong pipeline in the second half of the year. The next question is about new hires in the energy area, and the speaker congratulates Christa on her upcoming career move.

Greg Case, CEO of Aon, believes that the company will continue to see positive results in the second half of the year. The high engagement and low attrition rates among employees are contributing to this success. Aon has identified priority areas for growth, such as construction and energy, and has been successful in bringing in new talent to support these initiatives. The company has also invested $1 billion to accelerate its analytical capabilities, which will continue to show results in the coming years.

The company is committed to investing in its client-serving capability and expanding its expertise in various industries such as construction, energy, and life sciences. This will help them achieve their goal of mid-single digit or higher organic revenue growth. They are also focused on connecting reinsurance and commercial risk capabilities to better serve their clients.

The paragraph discusses Aon's success in terms of human capital, talent, health, and retirement, and how these factors have been reinforced and supported by Aon Business Services. The company has brought in unique talent from various industries and is focusing on building momentum for the next three years and beyond. The acquisition of NFP is expected to bring in $45-60 million in EBITDA each year, and while a larger acquisition may be considered in the future, it will be evaluated based on return on invested capital. Overall, the company is pleased with its current platform and its potential for growth.

The speaker discusses their high expectations for NFP and how they have been exceeded. They plan to focus on the platform and reinforce the M&A plan. They believe share repurchases offer the highest ROIC opportunity, but smaller acquisitions may also be considered.

The speaker discusses Aon's strong free cash flow growth and their commitment to share buybacks. They also mention that the M&A environment is picking up and that the overall market environment is transitioning, with pricing remaining flat but with variations within different markets.

The current insurance market is still favorable for buyers, although prices are starting to moderate. Transaction services are seeing a good share of the pipeline, and property prices are heading towards flat with potential for decreases for better risks. Casualty is still increasing in pricing, with a focus on auto and other risks involving wheels. As the market transitions, client behavior is also changing, with potential for investment in premium in areas where they previously made cost-cutting decisions. This trend is expected to continue throughout the year.

The speaker responds to a question about the increase in organic growth in Commercial Risk. He explains that the growth is due to net new business generation and strong retention, which are driven by the company's investments in risk capital and human capital. These investments allow the company to help clients see the risk market differently and make better decisions regarding coverage lines.

In the paragraph, the speaker discusses the factors driving the company's success, including the ability to win new clients and retain them. They also mention the investments being made in certain priority areas, such as construction and energy. Another speaker adds that clients are increasingly concerned about risks related to technology, trade, workforce, and weather, providing opportunities for the company to help them navigate these issues. The speaker also addresses the increase in the tax rate, attributing it to a mix of geographic and product factors, as well as potential discrete items.

The company has not disclosed the specific breakdown of the tax rate, but it is consistent with the first quarter due to a mix of geographic income and unfavorable discretes. The discretes can be either favorable or unfavorable, making the tax rate fluctuate by quarter. The company focuses on the full year rather than individual quarters. In terms of net new business in the US, there has been a 6% growth in Commercial Risk compared to the previous quarter. This is due to better retention and increased connectivity within the company. The 3x3 plan has also contributed to this momentum.

The company has seen an increase in growth in Q2 due to the introduction of new analyzers and service enhancements. This growth is global, with all solution lines experiencing 6% or greater growth. The company's priority hiring pipeline is expected to continue this growth, particularly in the energy and construction sectors. The company's focus on trade and reshoring, enterprise client strategy, and energy, including renewable energy, is driving this growth. Investment in analytics is also important for managing these risks and matching capital to them.

The speaker, David Motemaden, congratulates Christa Davies and asks a question about the drivers of organic growth at Aon over the past seven to eight years. They note that historically, most of the organic growth has come from productivity improvement rather than hiring more employees. However, on recent calls, it has been mentioned that Aon is hiring more than in the past, which is seen as a positive change.

The speaker discusses the company's focus on delivering quality services to clients and the need for better solutions and content. They mention a megatrend analysis and survey that shows the importance of this focus. The company has invested in better capabilities and global integration to serve clients. They plan to continue investing in productivity and doubling down on their efforts.

Aon Business Services is investing $1 billion to strengthen their talent, capability, and risk analytics. This will allow them to bring in more skilled individuals and provide better services to clients. This investment will not affect their commitments to improve margins and free cash flow. Aon also sees potential in their recent acquisition of NFP, which will allow them to expand their capabilities into the middle market. This mission is challenging, but Aon is determined to succeed.

In the second quarter and throughout the year, Aon's middle market business is expected to grow. The company is excited about the independent and connected philosophy they are implementing with NFP, which will help them serve middle market clients. Aon still sees room for growth in this market and is relatively underweight. A question was asked about the geographic footprint of earnings, including NFP, and whether it differs from Aon's over the past decade.

During an earnings call, Aon executives Christa Davies, Meyer Shields, Eric Andersen, and Greg Case discussed the company's investments in talent and its focus on growth areas. Davies confirmed that Aon is more US-weighted due to the nature of its business, and Andersen explained that the company has been actively pursuing talent for the past 12 months. Case added that productivity from these new hires will evolve over time, with significant impact expected in 2025 and 2026.

The speaker discusses the current state of talent acquisition in the middle market and how there is competition for good talent. They mention the integration of NFP into Aon and how it will provide better content and tools for employees to serve their clients. They also mention the importance of delivering analytics at scale to middle market clients.

The speaker discusses the goal of making NFP colleagues better equipped to serve their clients in the health sector through the use of analytics, technology, and content. They also mention the success of the Wealth organic growth and the potential impact of the NFP acquisition on the business mix.

Aon has a strong position in the pension risk transfer market, but they are also seeing growth in this area from NFP, which they recently acquired. They have been working to integrate NFP's capabilities and products into their own and have already opened access to their broking center and some products. They are also planning to provide NFP with analytic capabilities in the future. Aon is also seeing growth in the cyber market.

The speaker addresses the recent CrowdStrike outage and its impact on cyber insurance. They mention the need for clients to assess their coverage and the potential risks of system outages. They also mention the launch of a new cyber analyzer and welcome a new member to the leadership team.

The speaker thanks Edmund and Christa for their contributions and leadership at Aon. They express gratitude for Christa's 16 years of excellence and conclude the conference call.

This summary was generated with AI and may contain some inaccuracies.