Good morning and thank you for holding. Welcome to Aon plc’s Fourth Quarter and Full Year 2017 Earnings Conference Call. At this time, all parties will be in a listen-only mode until the question-and-answer portion of today’s call. If anyone has an objection, you may disconnect your line at this time. I would also like to remind all parties that this call is being recorded and that 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 fourth quarter and full year 2017 results as well as having been posted on our website. Now, it is my pleasure to turn the call over to Greg Case, President and CEO of Aon plc.

Thank you and good morning everyone. Welcome to our fourth quarter and full year 2017 conference call. Joining me here today is our CFO, Christa Davies. For your reference I would note that there are slides available on our website for you to follow along with our commentary today. Before we discuss the financial results of the quarter, I'd like to reflect on Aon overall in 2017 and the efforts of my colleagues to further strengthen our firm consistent with Aon's record of value creation. This year was a pivotal year for Aon. As we completed significant steps to reinforce and build upon a decade long strategy to be a leading global professional service firm delivering a broad range of risk, retirement and health solutions enabled by proprietary Data and Analytics. Earlier this year we completed the divesture of our outsourcing platform, a meaningful acceleration of our strategy and a tremendous accomplishment made possible by the tireless united efforts of our colleagues around the globe. The divesture provided a further catalyst for our strategy and actions to deliver shareholder value. And as it reinforced our focus to provide advise solutions and further align Aon's portfolio around our clients highest priorities. It generated significant capital to accelerate investment and emerging client needs and in our firm. Noting over 1 billion invested on high growth areas of M&A again in 2017. It's part of the catalyst to further unite our firm and our one operating model creating greater efficiency and operating leverage across the firm. And finally, the divesture reinforces our return on invested capital, decision making priority, and emphasis on delivering double-digit free cash flow growth over the long-term, highlighted by a record amount of capital returned to shareholders through share repurchase and dividends. Overall our optimism is got through conviction…

Thank you very much Greg and good morning everyone. As Greg [indiscernible] our results reflect a strong performance in the fourth quarter and a solid year of progress in 2017. During such a pivotal year for the firm we delivered strong organic revenue growth, substantial operational improvement and underlying free cash flow growth while continuing to take significant strength steps to increase the effectiveness and efficiency of our operating model. In addition we deployed $3.8 billion of capital in 2017 including the return of record $2.8 billion to shareholders through share repurchasing dividends and $1 billion dollars in acquisitions in high-growth, high-margin areas of our portfolio. Turning to slide 10 of the presentation, our core EPS from continuing operations excluding certain items increased 18% to $2.35 per share for the fourth quarter compared to $2 in the prior year quarter. And within the results was $0.06 per share favorable impact from foreign currency translation due primarily to a weaker U.S. dollar. In addition, we incurred $0.06 per share unfavorable impact recognized through other expense from the sales of certain businesses in the quarter and losses on the re-measurements of assets and liabilities in nonfunctional currencies. If currency were to remain stable at today's rates, we would expect foreign currency translation to have a similar favorable impact in the first quarter of 2018. With full year EPS included a $0.13 per share unfavorable impact recognized through other expense primarily for losses on the re-measurement of assets and liabilities and nonfunctional currencies partially offset by an $0.08 favorable impact on EPS from foreign currency translations. Certain items that were adjusted for in the core EPS performance and highlighted in the schedules on page 11 of the press release include non-cash intangible asset amortization, non-cash restructuring charges, non-cash expenses related to pension settlements,…

Thank you. [Operator Instructions] Our first question comes from the line of Dave Styblo of Jefferies. You may now ask your question.

Hi there, good morning guys. How are you?

Good Dave.

Good, so this is arguably the best organic growth quarter you've had in several years, not only from a total 6% standpoint, but also from a well balanced view where all the segments are contributing strong performance. And as always I can appreciate the margin profile and those puts and takes, but there are up 200 basis points in 4Q and that seems to be almost entirely driven by restructuring savings. And I know you guys have talked about reinvesting some of those savings at certain points. So I guess the question is, did you do that a material way this quarter and if not then why did margins expand more given the strong organic growth?

So may be David a couple things, we'll hit the growth piece first and then sort of talk about the overall expansion as we think about improving the business overall which includes restructuring and core and Christa can talk about that a bit. First on the organic side, you're absolutely right, we feel very good not just about the quarter but really about across the year in terms of where we are and why we don't give specific guidance on expected levels of organic growth. If you look at our history and actual performance and put in perspective we think that's pretty interesting. If you go back and look at from '14 and '15 we're going roughly 3% across the board. Now in '16 and '17 that’s elevated to 4% and we're doing so in a way as Christa described, by investing in higher growth, higher margin areas in M&A and organically, as well as improving operating leverage of the firm. And that fundamentally is what's going to drive margin improvement overall and you're seeing that actually play out and it's played out in ’17, played out in ’16 and we would say as you go forward and think about organic growth, you're going to see that measured progression into ’18 and ’19. Now in terms of overall economic leverage and the operations we get out of it and Christa may be talk about the tradeoff between the two.

Yes and Dave we’re absolutely true with the operational performance in 2017, 15% operating income growth we're very, very pleased with. As we think about that 8% operating income growth driven by restructuring savings and 7% growth driven by co-operational improvements. As we think about the growth in operating income and margin going forward it's really going to be a blend of core improvements in operations, restructuring savings and a return on the investments we've made in M&A we really invested over $2 billion in M&A in the last two years. And so we’re driving up operating leverage on a sustainable basis and you can see that through the accelerated revenue growth that Greg described, so improved top line which is really leading to a much stronger bottom line performance. And you can see that historically accelerating as well, so we’re very pleased with 2017 and we believe that we are very well positioned for a very strong 2018.

That really does Dave put you on track if you think about the platform now, higher organic growth, higher margin, higher operating income growth across the board and we think ’17 proves that out and ’18 will show the same.

Okay, great and then, how do you guys think about the go no go decision for pay offs when you're generating incremental savings from restructuring plans versus making more restructuring investments. And kind if I take a step back and look at your additional $900 million investment looks like that was about a two-year, just over two year payback from the $400 million of savings and now you're spending about another $275 million. It looks like that's going to generate $50 million of incremental run rate savings. So that's more like a, seems like more like a five to fix year payoff. So can just help me understand, how you guys think through that process of whether to invest and when not to invest for the savings?

Yes, David it's a great question, because we really do think about this as we think about all forms of cash usage on a return on capital basis, cash-on-cash return. And so whether we're spending money on share repurchase which is really our highest return on capital opportunity, we spent $2.4 billion on that this year or its M&A where we spent $1 billion dollars on that and we spent money on M&A you've really got to get at a higher return on capital than share repurchase which we have across that range of terrific opportunities we've invested in this year, or on the restructuring program where we're generating a great return for shareholders. And so it's a blend of all of these that gets us to return on capital as you can see for the firm at 17.8% in 2017. And so we're driving overall return on capital and as we think about that restructuring range of initiatives, we're very excited that we found incremental opportunities to generate more savings, overall a $450 million savings outcome in 2019 against $1.175 billion in cash that's a great return across that portfolio of activities.

And again in essence if you think about sort of where we anticipate ending 2018 as you pull all this together the operating engine and the platform the Christa described and what we're doing with the operating model, we'll end ’18 again with an engine called Aon with a higher organic growth profile, higher margin, higher operating income growth, higher return on invested capital and that really is sort of the reason we undertook all the activities post the divesture of our outsourcing business to really reinvest and strengthen the firm. So the catalyst we talked about in June is really playing out we think quite effectively as we move into ’18 and we want you think about sort of what we look like at the end of ’18 when we get all this completed.

Okay, thanks and then just real quick on tax rates, I know you talked about 19% for this year. Previously you had talked about perhaps being able to have that drift over time, is there still an opportunity in ‘19 and beyond to see that tax rate possibly nudge down a little bit?

What we would say is, our underlying effective rates were 17.5 for to 2017 and we do expect modest upward pressure based on U.S. tax reform. And what we would say is, based on what we estimate so far, our best estimate of full year non-GAAP for 2018 is 19% and we'll always look for opportunities whether that's tax rates coming down due to the tax rate, tax reductions across the world and we are very fortunate to be domiciled in the U.K. with a territorial system and a global capital structure where we manage all that capital and cash on a global basis.

And one of the things, if you look at the punch line for tax rate overall and our history and sort of our capability in that arena, I think the punch line for us is really this is a marginal event overall as you think about all that's written about it. It doesn't change our views on what we're going to achieve for 2018 as Christa described at 7.97 plus doesn't change what we're doing from an operational improvement standpoint all the things we're doing that really is a marginal event overall in terms of what we're trying to accomplish and free cash flow generation of the firm nothing has changed in the context of any of this as we push forward.

Right, got it. Thank you.

Thank you. Our next question comes from the line of Sarah DeWitt of JPMorgan. Your line is now open.

Hi, good morning. On the increase in the expense savings target, could you just talk about what areas drove that? And then secondly, at $450 million that's still only above 6% of cost, so to what extent do you think there could potentially going to be some more for further upside?

Yes, Sarah as we think about it we're creating the next generation global business services model. I'm really driven by running Aon as one firm, Aon United and it's going to drive better scalability, flexibility and really operating leverage for the firm we're building in productivity savings as we scale the business going forward. And really as we looked across this operating model across the firm, it's really the same three areas that we're driving the increased savings in. It's IT, it's real estate and it's people and as we bring Aon together really out of the two segments we used to operate in, in 2016 into one Aon operating model under Aon United, we're really identify further savings. $450 million is our current estimate of savings and that will be delivered in 2019 and we don’t see further upside at this time Sarah, but we'll continue to optimize the model and we’re very excited about the progress so far.

Okay, great thank you.

Thank you. Our next question comes from the line of Adam Klauber of William Blair. You may now ask your question.

Thanks. Amazon had a big announcement obviously in the health industry. One are any of those companies your clients and two how do you think that will just some broad strokes how will that impact the industry over the like next five years or so?

So Adam from our standpoint we don't talk about clients specifically, although I would say we're in a very privileged position in terms of who we serve across the world. And in terms of sort of what was announced, there's not a lot of clarity on it, but we love the spirit of it. We just absolutely love the spirit of it, you how much we love this category, it's just such a monumental opportunity and it's driven out of a set of needs both for companies and in their employees which is so high. I mean you know the statistics overall health is challenge. Per unit cost health care is going up. You know the $150 million Americans that we address and this is really a U.S. story principally, although for us it's a global opportunity. But for $150 million Americans and employer sponsored plans there's just substantial pressure everywhere. And our whole, monitor our whole approach has been, you know when you can create greater alignment between employers and employees, greater transparency give them choice, they are least better decisions, healthier employees and lower costs and we are absolutely excited in favor of anything that moves in that direction because this opportunity is so massive. And you know, we've invested very, very heavily and innovated around active employees as well as retirees and in a word we believe in a very, very unique position to shape this outcome and see in a movement my company has taken initiative in this arena is just absolutely terrific, so looking forward to see how this evolves.

Great and then Data and Analytics had clearly a strong quarter. Could you give just one or two examples of the type of wins that drove that could be a positive number.

Well, actually Adam it really comes across the board. So the daytime expense is particularly on the Affinity side as that's an exceptional wins with clients. And again this is where we're taking segments of clients understanding sort of overall needs, aggregating those needs and coming up with very innovative solutions to address those needs and we've seen a great example of that across the board on the on the Affinity side. We also have the business in point is in this category as well. We're actually helping insurers and broader companies think about more holistically how they think about their risk management needs. This is outside the placement in a consulting and advisory basis done exceptionally well in that. And as we added before we also benefited a bit given the activity in the second half of the year on the flood side. So really this is for us, we love this category, this is obviously a category we're breaking out Data & Analytic services. We want to put a spotlight on it. It will be variable sometimes up a lot sometimes up a little bit. Over time, we think up a lot and it's an area of substantial investment we're going to make over time and we think it's going to be beneficial for Aon, for our clients, and for our shareholders.

Okay and then thanks. This is finally for Christa, operating cash at roughly $2.3 billion, $2.2 billion, $2.3 billion in ’16 you are investing the business in ’17, you're investing in ’18, so by ’19 do you think we get back to those levels or could we possibly exceed those levels by ’19?

Yes, look we certainly think that's true Adam and what we would say is our goal is really double digit free cash flow growth over the long term and we’re obviously driving improved return on capital on a cash on cash basis driven by strong operational improvement, restructuring savings, and the return on the investments we're making in M&A. And so we feel all three of those are going to contribute strong free cash flow growth combined with working capital improvements which are going to be substantial over $500 million over the long term.

Okay great, thank you.

Thank you. Next question comes from the line of Yaron Kinar of Goldman Sachs. You may now ask your question.

Good morning everybody. Thanks for taking my call. So my first question is with regards to the reiteration of the $7.97 EPS target for 2018, the adjusted EPS and I guess if I look at the net impact of tax reform and the $50 million of additional cost savings not all of which I'd expect to flow through in ’18. I think I get a negative impact between the two. So I'm just trying to better understand what else is driving either to feel so comfortable in that 7.97 or exceeding 7.97 target?

Yes it's a great question Yaron, and what we would say is, we delivered 7% EPS growth in 2017, including a headwind from both a higher effective tax rate and significant one-time impact tin other expense year-over-year. Our underlying effective rate was 17.5 for2017 so you've got a modest upward pressure based on the changes in your tax reform, but despite the high tax rate of 19% we believe strong operational performance, savings and Aon United model, returns on the investments we've been making in high growth, high margin M&A areas, we'll continue to reinforce our confidence in exceeding 7.97 on 2018 and delivering double-digit free cash flow growth over the long term.

Okay, just so it sounds like it's may be more of a margin improvement story given the investments you've undertaken?

Absolutely, I mean it's operating income gross and it's operating income growth and it's operating income growth coming from the core, coming from restructuring and coming from the M&A investments we've made in high growth high margin areas.

Understand as well, what we're doing on the one Aon approach on the operating side that Christa described, that's creating operating leverage in our business. This is just about a dollar tax save this creates greater operating leverage so as we grow organically we get disproportionate benefit from that and then if you think about sort of the investments and acquisitions and higher growth, higher margin areas all these things come together to give us the confidence that Christa described.

Okay and then with regards to free cash flow generation so and you have a long term target of double digit growth. If I think let's say the next year, you think it's reasonable to expect that level of growth in 2018 on an underlying basis.

Yes, I mean what we would say Yaron is we're looking at double digit free cash flow growth over the long term so that’s every year over the next couple of years and what we would say is it's driven by ’18 is absolutely going to improve and you still 6% underlying free cash flow growth in 2017 and really it was actually looking much higher that and really driven by very strong organic growth in Q4 we had slightly higher working capital and, so you can say that you're generating then even in 2017 with everything going on. We think 2018 will improve and 19, 20 and 21 will continue to accelerate form that.

Okay, got it and one final question. Just you have very strong growth in the reinsurance brokerage business. Can you maybe walk us through your thoughts as to the ILS market in 2018. I think we've seen a lot of replacement of capital of the last quarter and a bit. How do you see that market develop over the course of this year.

Yaron with first of all, we had a remarkable year and reinsurance for colleges just have done a terrific job sort in that category as we are number one in 3D, we're number one in fact, we're number one in ILS and make another additional investment sort of outside that, that sort of arenas sort of really was a remarkable year and we actually had progress on the organic side in all categories wasn't just one category. And we also continue to make substantial sort of investments across the board to sort of strengthen or do nowadays in the context of that. So against that backdrop, when you think about sort of the ILS market number one of that marketplace that performed exceptionally well, if you look at now was about $600 billion in global reinsurance capital overall and alternative capitals to increase to about $82 billion give or take, so it's kind of 14%, 15% of the overall global reinsurance capital pool. It was all terrific performance there and again our colleagues were just absolutely remarkable and both the level and quality of work they did throughout ’17 and actually into ’18 as we watch capital come back and [indiscernible] market come back in and replenish losses, so you're right it was a remarkable year for us on the reinsurance side across the board included in the ILS world. Q - Yaron Kinar And do you have any thoughts with regard to how that continues to develop an ’18.

Well, listen if you think about growth overall for us in ’18 and you mention growth at the beginning and I would sort of say, sort of in that context we're going to continue to make progress as I mentioned we had some small benefit. In terms of sort of the reinstatements that happened sort of at the end of the year, so there's a bit there but we really saw growth in all the different areas I describe before. You'll see a continuation of growth across Aon I don't think we always think about it from an Aon standpoint 3% in ‘14 and ‘15, 4% in ‘16 and ‘17 and you'll see that trend continue as we move into ’18.

Thank you. I appreciate all the color.

Thank you. Next question comes from the line of Meyer Shields of KBW. Your line is now open.

Thanks. Good Morning. Sort of a small ball question when you've got reinstatement premiums driving to a limited extent reinsurance organic growth are there any expenses offsetting those incremental revenues.

There are some and again I would think about this moralistically, we've got the level of service required in the complexity of what went on sort of at the end of the year is just absolutely astronomical, so the things that cause those sort of that in ecosystem of sort of comes together in sort of the service of the client. The payment of claims, the movement of service overall so for us this is, this kind of all blends together, so there is a little bit of potentially some upward pressure our upward benefit on the margin side but I wouldn't overplay that. Nor would I reply to the impact of the reinstatement they were there, they were real but when you think about performance overall it was really driven by fundamentals on the reinsurance side.

Okay, that's helpful. And then I guess this is for Christa, can you walk us through I guess directionally our changes in interest rate affect or interact with the new pension accounting.

I'm not sure, Meyer I just [indiscernible] little bit more about your question because obviously interest rates if interest rates were to rise. They have a positive benefit to out pension unfunded liability and pension contributions by the time 100 basis point increase in the discount rate which is really equivalent to AA corporate bond rate reduces our pension unfunded liability by about $400 million and so I mean I don't know if that's helpful or what you were looking for.

It is, I just want to put that in the context of the new standards above the line versus below the line items.

Sorry, there is no impact on the above the line, below the line. It's just a movement in the location of the P&L. Used to be in comp and benefits affects it's now in other income and expense there's no change the absolute dollar in the P&L. I mean we’ve given guidance that what you should expect in other income and expense on that pension specific item is about $10 million in expense a quarter.

Right, so just close the loop if interest rates continue to rise, then obviously or I’m asking not obviously that would benefit the expenses going forward.

Yes, it would.

Okay, thank you very much.

Thank you. Next question comes from the line of Thank you very much. Thank you next question comes from the line of Elyse Greenspan of Wells Fargo. You may now ask your question.

Hi good morning. My first question you guys are pretty strong. Pick up and growth in commercial risk. I think there were some timing move in the third quarter, if you could just give us kind of a little bit of an outlook in that business and would you expect you guys pointed to a stable market impact overall in the fourth quarter, would you expect exposures and prices to move when we think about the market impact for 2018.

So at least a couple perspectives first on commercial risk and again remember we're breaking out commercial risk differently than anyone else so we used have all these together now we’re breaking out this specifically. We'd encourage you to look at that over the course of the year and you see ’17 has continued progress over ’16 our collogues continue to do a terrific job net new business generation was at record levels, so really terrific on the commercial reside. And from a pricing standpoint your question we have to look at all and as we look at our overall book and we calculated down to the individual risk, exposures are modestly positive as we described pricing was marginally negative, still marginally negative leading to a relatively stable market in impact overall. I would have there as we said before insured values are what's most important, they drive more the economic impact and than anything else. And as we absorb the global economic environments, we believe it looks slightly better in ’18 then it is ’17 which has positive implications but I would emphasize as we continue to do our work and make our investments in data analytics it means we're evaluating risk at a very detailed micro client level which we believe enables much better outcomes in pricing. In terms of issues for our clients and ends up being much less about the state of the market and more about individual client dynamics sort of the drive, sort of what happens for us overall. And there's already a [indiscernible] for us in our client - and sort of what we've done there. The investments in these kinds of capabilities, we think create great outcomes for clients again analyze at the individual level and in our client for as example we got 800 clients, so there are now 300 placements. The clients were up 25% and so in this [indiscernible] we totally their choice. They're seeing an up and outcome an opportunity which is much better for them and so it's less about the overall market and where they are specifically we even had a client in energy client, Caribbean energy client. That frankly it undergone some trauma was worried about literally whether you were going to come out in overall process to Aon client 3D and other analytics and end up actually at roughly stable pricing with very strong terms conditions and absolutely thrilled sort of the overall outcome, so I want to put in perspective on how we think about sort of the overall market environment much more clients and market.

Okay, thank you and then in terms of the tax paid out well on the 19% going forward does that Christa this I know in the first quarter of last year there was obviously a benefit from stock comp, so we think about the 19% is that excluding if we can see any kind of benefit from the stock comp accounting in the first quarter and kind of X any other discrete items.

At this stage Elyse it is all encompassing on that we would say it based on our initial interruption and changes in U.S. legislation, kind of functions of geographic mix and impact of discreet and therefore that’s our full year non-GAAP effective rate at ’19 and then based on what we see during the year this great could be up or down.

Okay, great and then another question in terms of you guys have raised on the savings program by $50 million this quarter but the cash charges to go up by $275 million. I'm just trying to understand if we think about those two numbers together why would it have, why is it taking $275 million of additional charges to yield $50 million of additional saves. And basically reducing the yield, the yield on the charges of the entire program, what kind of really drove the higher cost with the $50 million this quarter.

So Elyse we don't really think about it that way we think about it as an overall portfolio of the program and therefore we think about $1.175 billion in cash driving $450 million in savings which is a terrific return on investment as I said earlier on restructuring. We do really think about restructuring, share repurchase, M&A any kind of cash investment on a return on invested capital basis, cash-on-cash return. And so we're looking at this cash-on-cash returning and saying that as an exception return. And we identified for the savings and we thought that it made sense to deliver those savings and so that's really how we're managing this on an overall portfolio basis as suppose the incremental way in which you described it.

Okay, great and then one last question on the share repurchased obviously it's been [indiscernible] bit this year just given some of the acquisitions and when they closed, how should we think about the level of share repurchase going forward for 2018.

So first of all we don't give guidance on share purchase what we can say is we've got a strong balance sheet, cash [indiscernible] from investments $1.3 billion at year end 2017 were generating strong free cash flow growth through the operating income growth and working capital improvements as we said and we look at allocating capital based on the highest return on capital on share purchase remains the highest return on capital activity across Aon which is why you saw as to $2.4 billion share repurchase in 2017 and we expect to continue share repurchase in 2018.

Okay, thank you very much. I appreciate the color.

Thank you. Next question comes from the line of Kai Pan of Morgan Stanley. Your line is now open.

Thank you and good morning. So I just follow up this question on the share buybacks. I just working through my math about the 2018 free cash flow is that like if you adding back the $940 million of onetime like a tax payments in 2017 we've got $1.4 billion is that run rate like a baseline run rate, is the correct way to look at it.

I mean they're obviously some onetime cash outlays Kai in 2017 the two biggest ones with a $940 million of cash taxes as you said and the restructuring charges and so look what I would say is you so underlying free cash flow growth of 6% in 2017. There was one time items that you should back out to get your run rate and then we do expect strong free cash flow growth in 2018, driven by strong operational performance in the call, restructuring savings, return on the investments we've made from M&A and improvement from working capital.

Okay, so if you could do the math 1.4 starting points you're going to spend same amount or leave it even more little bit more on the restructuring cost then you grow double digit on that and then you take $400 million, dividends you have more than a little bit more than a $1 billion dollars spend between acquisition and buybacks which will be significantly less than what have to seen in 2017.

Kai, I’m not going to give guidance from free cash flow for 2018. We don't give out that number what I can say is we do expect strong free cash flow growth in 2018. We do have an elevated cash and short term investments on the balance sheet $1.3 billion on left over from that cash in the transaction obviously we expect to generate substantial free cash flow in addition to the cash and short term investments have in the balance sheet to drive overall deployable cash in 2018. We believe the highest return on capital activity to use that cash is share repurchase and we expect obviously to look at M&A. We've got a terrific M&A pipeline and to continue organic investment. As we have in 2017 in high growth areas of the business.

Okay, that's great. My follow up is on is different topic on the FCA investigation if I heard it correctly you mentioned that there are some reduction in term of regulatory related costs in the quarter could you explain a bit the what's behind that and also did you have any updates on the FCA investigations.

One of my start just overall and Christa can talk specifically about sort of what we did in the quarter because indication sort of how we feel about the process overall at this point. First we welcome the opportunity to assess wise to make our industry more effective and responsive to clients fundamentally that's what this is all about. I’d reserve three things sort of in the context of this. One is around the client imperative what this all means, the second is kind of the size of our work in this area. Aon’s work in this area because it seems the numbers don't quite make sense to us and then overall profitability and the impact that this might have been in London that's been written about two which also don't seem to square with totally the fact but the most important piece of this is the clients in all aspects what we do has to focus on client value and clients [indiscernible] it really is a reason our industry exists and why Aon exists. And we invest in huge amount in the city to innovate for our clients and even the restaurants got to drive value for our clients be fully transparent to them in our approach and also the optional. And every respect, they've got to be able to decide where they want to begin to approach out of the approach and as I described before Aon client 3d is a great example. We spent years develop the analytics behind it and we're able now to look at our book of business risk by risk than aggregate it's a portfolio level. This creates enormous benefit for our clients and by the way 1800 of opted into this their choice it's grown by 25% in ’17 coming up on…

Yes and so what you saw in the quarter Kai was that we took a reduction a $14 million in charges related to certain U.K regulatory and compliance matters. As we believe our U.K. regulatory risk is less than we previously anticipated.

I really appreciate all the color.

Thank you. Next question comes from the line of Paul Newsome of Sandler O'Neill. You may now ask your question.

Just want to see if you could give us a little bit of color about the margin impact on the acquisitions that you've made whether or not we should see the compression or expansion related to the acquisitions themselves and if those impacts are change over time when you peers talked about sort of margin compression.

And Paul that is exactly right. I think what we observed in the first year of an acquisition is margin compression and you saw in the quarterly close you know two fantastic acquisitions the Townsend Group and UMG and we certainly saw margin compression in Q4 due to acquiring those businesses and so what you usually see is margin compression in the first year and then they contribute to margin expansion and operating income growth in the years thereafter. And really the reason for that margin compression in the first year is just the transaction cost to close the acquisition.

So if that's acquisition cost it presumably you're essentially putting businesses on at the same that have the underlying same margin as opposed to trying to buy something that you’re hearing expand the margins.

Yes, so we are obviously investing in higher growth, higher margin opportunity areas and we certainly see that, that was the case in 2016 and 2017 and then as you bring them into Aon we can really scale those businesses on to expand margins over time.

One of the realities Paul for us is that you think about the foundation of the return on invested capital approach that Christa described and we take in every investment of capital we make we don't invest this to get bigger I mean our is has to be we are bringing in content that we can scale and in doing so we create we think superior economic value. Christa describe in the transition costs of doing that and what you've got the fees etcetera up front but there's no business we bring in sort of say we're just going to continue to have a performance performed. We're taking their business and scaling across Aon are finding ways to improve that business based on Aon assets and I fundamentally drives the transactional capital approach we take otherwise you don't make acquisitions because buyback looks better.

Fantastic congrats in the quarter.

Thanks.

Thank you. Our next question comes from the line of Brian Meredith from UBS. You may now ask your question.

Hey thanks. Couple of quick questions for you, first Christa, just I believe you give what your kind of free cash flow based on that for 2017 is in the presentation that's like $1.8 billion is that correct, the Appendix G gives us 1778.

Yes, that's right.

Okay, so that's what we can used as a baseline here kind of looking forward okay.

Yes.

Second question is, I'm just curious when you think about the expense saves and stuff kind of going forward and kind of benefits, what are you thinking about and I guess as far as wage inflation because we're definitely seeing some upward pressure on that going forward?

Yes, Brian one of the things we would say is, we normally expect wage inflation let's call it, 2% on your biggest expense base call people. What we would say though is, we're obviously investing a significant amount of money, $1.175 billion in the Aon United operating model and the reason why I'm investing that kind of moneys drive $450 million of savings is because we are trying to get better operating leverage throughout our business. And improved productivity going forward and so we expect the investments we're making in the operating model to offset some post and that wage inflation to give us greater operating leverage in our business going forward.

Hey great, and then last question Greg or Chris could you talk a little bit about stars Freberg, how is that kind of perform for you since you brought it in and also I know you were looking to come to develop then bunch of insurance products around cyber which stars Freberg can you talk about progress there, how is the market accepting et cetera?

Yes, Brain for us we love this investment and it really just speaks to what innovation means and how one pursues it. Again if they're back and think about their well cyber marketplace just for reference pick your number $2.5, $3 billion of premium in 2017 give or take, by the way going up substantially, so the industry is celebrating. We've got a category, it’s new, its going up, it's terrific by the way Aon places as much or more than anybody in the marketplace you've got an incredible group of colleagues have driven this and led this having said that our colleagues would be the first to say look when you think about client need. Client need and our ability to meet their increasing needs on Cyber pick take your numbers its $450 billion of loss connected to related to cyber in ’17 so think about Brian $2.5 billion to $3 billion in premium, $450 billion and reported loss connected thereof. And by the way just for reference that includes zero for Europe and by the way just for reference that includes roughly zero for Europe because they didn't require you to report cyber losses that will obviously change in May, June of this year when GDBR kicks in and the regulations require cyber laws sireqiinI [indiscernible] and the regulations require cyber loss reporting which means cyber loss on a global scale is going to a trillion dollars. And yet worse our industry and by the way we're the leader, our industry is $2.5 billion to $3 billion. We are not meeting the needs of our clients, so we said listen what's the root cause of that how do we understand that and that's why we brought in [indiscernible]. This was not a set of is not a set…

Great, thanks.

Thank you. I would now like to turn the call back over to Greg Case for closing remarks.

I just want to say thanks everybody for taking part today. We look forward to discussion next quarter. Thank you very much.