Good morning, and thank you for holding. Welcome to Aon plc's Fourth Quarter and Full Year 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 your line 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 fourth quarter and full year 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. You may begin.

Thank you, and good morning, everyone. Welcome to our fourth quarter conference call. I'm joined by Christa Davies, our CFO; and Eric Andersen, our President. As in previous quarters for your reference, we posted a detailed financial presentation on our website. Our strong performance in 2021 is the direct result of deliberate steps we've taken that are enabling us to win more, do more and retain more with clients. We're driving top and bottom line results and are exceptionally well positioned to continue to deliver ongoing performance in 2022 and over the long-term. Most important, we want to express deep gratitude to our Aon colleagues around the world for their performance and results this year and for everything they've done for clients and for each other. Our colleagues delivered a fantastic Q4 and a very strong finish to an outstanding year. We achieved organic revenue growth of 10% in the fourth quarter, with double-digit growth in Commercial Risk and Reinsurance, driven by net new business generation and client retention. In Commercial Risk, we saw strength across the world, driven by net new business and retention in the core. We also saw strength in more discretionary areas of the portfolio as economic growth and client activity continued to increase, including double-digit growth in project-related work, and in transaction solutions as our teams responded to M&A deal flow and increased client demand. Within Health and Wealth Solutions, we saw double-digit growth in priority areas that we've been disproportionately investing in, in the last several years, including voluntary benefits in Health Solutions and in delegated investment management in Wealth Solutions, which remains an essential part of our portfolio. Our full year organic revenue growth of 9% reflects the strength and momentum of our Aon United strategy, which is designed to drive top and…

Thanks so much, Greg, and good morning, everyone. As Greg highlighted, we delivered another strong quarter of performance across our key metrics to finish the year. In the quarter, we delivered 10% organic revenue growth, the third consecutive quarter of double-digit organic growth, which translated into double-digit adjusted operating income and adjusted earnings per share growth, continuing our momentum as we head into 2022. As I reflect on full year results, first, organic revenue growth was 9%, including double-digit growth in Commercial Risk Solutions and Health Solutions. I would note that total revenue growth of 10% includes a modest favorable impact from change in FX, partially offset by the impact of certain divestitures completed within the year, most notably, the Retiree Health Care Exchange business, as we continue to shift our portfolio towards our highest growth and return opportunities. As we look to 2022, we're continuing to monitor various macroeconomic factors, including the underlying drivers of GDP; asset values, corporate revenues and employment; inflation; government stimulus; and the impacts of COVID variants, all of which impact our clients and our business. We continue to expect mid-single-digit or greater organic revenue growth for 2022 and over the long term. Moving to operating performance. We delivered substantial operational improvement, with adjusted operating income growth of 17% and adjusted operating margin expansion of 160 basis points to a record 30.1% margin. The investments we have made in Aon Business Services give us further confidence in our ability to expand margins, building on our track record of approximately 100 basis points average annual margin expansion over the last decade. We previously described the repatterning expenses that incurred within 2021, which have no impact on year-over-year margins. While certain expenses may move from quarter-to-quarter, we do not expect further repatterning. We expect the 2021 expense…

Thank you. We would now like to open the phone lines for any questions. [Operator Instructions] Looks like our first question will come from Elyse Greenspan from Wells Fargo. Please go ahead.

Hi, thanks. Good morning. My first question goes back to some of Christa's comments on -- you guys mentioned investing organically and inorganically over the coming year. So I was just trying to get a sense of the increase in expenses that you expect in '22. And if you have a thought on how the margin expansion could trend relative to 100 basis point average you mentioned over the past decade. Thank you.

Thanks so much, Elyse. As we stated previously, our goal is to grow margins each and every year, including in 2022. And we expect 2022 margins to be driven by accelerating revenue growth; portfolio mix shift to higher-growth, higher-margin businesses; and leverage from Aon Business Services. You've seen our track record, as you mentioned, of driving 100 basis points of margin expansion a year over the past decade, with some years a little more and some years a little less. We did deliver above-average margin expansion of 160 basis points in 2021. And there will always be lumpiness from quarter-to-quarter, which we did see this year, in terms of the timing of investment and discretionary expenses. So are we going to expand margins in 2022? Absolutely. And as we look to 2022, we also expect investments in colleagues, some ongoing reduction of T&E and investments in long-term growth. So we expect to drive margin expansion, net of investments, over the course of the full year.

Okay. Thanks. And then on the capital side, you guys bought back $2 billion, a pretty robust number in the fourth quarter. And if you think about going forward -- I know you guys don't provide guidance on buybacks. But is the right way to think about the potential level of capital return -- thinking about expectations for free cash flow as well as incremental leverage that you guys could have as your EBITDA growth, can you just help us think about the capital firepower you have in '22 and beyond?

Absolutely. And look, we do expect double-digit free cash flow growth for the foreseeable future. So we have a substantial cash flow generation capacity, and we're in a really strong capital position. And so you're right, Elyse, the first starting point is expectations for free cash flow, which is double-digit over the long-term and incremental debt capacity. So as EBITDA grows, you should expect us to add debt, keeping our leverage ratios in line with our current investment-grade ratings. And then what we would say is we continue to follow a very disciplined return-on-capital approach to allocate that capital. And you saw that with share buybacks remaining the highest return on capital opportunity across Aon, $3.5 billion repurchased in 2021 and $2 billion in Q4, giving you a sense of how undervalued we think the stock currently is. But in addition to investing in share buyback, Elyse, we have a substantial M&A pipeline, and we expect to do M&A during 2022 in areas of high growth but high demand from clients. We also expect to invest organically in our colleagues, whether it's in technology to scale innovation across the globe. And so we're really excited about the $4 billion of capital return to shareholders in 2021. And we're also really pleased with the return on capital of 27.4% in 2021, an increase of over 1,500 basis points over the last 10 years.

Thanks for the color.

Our next question comes from Mike Zaremski from Wolfe Research. Please go ahead.

Hey, good morning. This is Charlie on for Mike. So Aon has been ahead of the curve building collaborative workplaces via less real estate. Does Aon expect to undergo any cost-cutting measures similar to some peers who have announced for more expense saving initiatives?

We'd start, I think, with -- our entire design, our entire approach is really around, as it always is, around client delivering, which we're trying to accomplish, supporting our colleagues to do that. So we will, first and foremost, really optimize around that approach and that perspective. And we've done, as you've described, a number of innovative things to sort of reinforce that. It's actually worked exceptionally well on the client side and for our colleagues as well. So you'll continue to see us do that. The outgrowth on the expense side will be what it will be. We'll make investments, as Christa just described, on a return on invested capital basis, and that's actually worked exceptionally well for us. And where there's opportunities to create optimization, we'll do that. Where there's opportunities to invest to create a better outcome for clients and colleagues, we'll do that. So that's really how we thought about it, and it's worked exceptionally well for us, especially as the environments continue to evolve.

Okay. Great. And then you noted in your slide deck that exposures in pricing on the P&C side were modestly positive. Can you talk to us about what you're seeing in terms of momentum there? And whether you have an outlook on the P&C pricing environment for '22?

Go ahead, Eric.

Sure, Greg. Thanks. Listen, I would say -- and I think I've said this on a couple of these calls, the pricing environment really is just one factor. You also have to look at exposure growth and the like. And listen, our role in this, when we work with our clients, is really about, first, how they do risk identification, risk management. So there's a lot that they do that doesn't go into the market. And then, ultimately, they're also financed, right? So what can they do on their own balance sheets and how can they protect themselves using their own resources? But when they get to a point where they actually want to do risk transfer, they have a number of tools at their ability. They look at retentions, they look at coinsurance, they look at deductibles, they look at terms and conditions, they look at limits, all these areas. In fact -- and we try and bring all of our insight, our data and analytics to them to help them make those best choices. And so when you see discussions around market rates, it's different than what clients actually buy. So it's not a direct line from the carrier, who may say the market's going up, the market's going down, versus what they do for their own portfolio.

Okay, Thank you..

Next, we'll go to Paul Newsome from Piper Sandler. Please go ahead.

Good morning. Thanks for the call, everyone. I was hoping you could give us a little bit more on the relationship between organic growth and margin expansion over time. The rule of thumb in the industry has been sort of 3% to 4% organic growth, where most brokers allows for -- or margin expansion. But there's been some folks have been talking maybe that, because of the pandemic, that relationship has been broken down, and I really wanted to see what your thoughts there on.

Well, the top line, a couple of things. First, when you think, overall, about what we've said around organic, we've continued to improve that profile, strengthen that profile as we serve clients, we believe, more and more effectively over time against their demands, which are changing and increasing all the ways we've described. And you've seen us kind of go to mid-single-digit or greater, and we see that opportunity obviously achieved in 2021. We see that opportunity in 2022 and beyond, again, serving existing demand that's out there, but also net new demand, new addressable markets in terms of what we're trying to accomplish in doing. I would just also observe -- and Christa described very well our perspectives on margin and what we're able to accomplish. If you think about it over the last 10 years, there's kind of a variety of different growth environments. We've achieved margin expansion and fully expect to do that. But Eric, anything you would add to that?

Greg, I would say there's a number of areas where we continue to drive growth and how we've built our strategy around trying to take advantage to bring that value to clients. You've got what we do today, how do we connect it globally, how do we make sure we're bringing new solutions within our existing business. And then areas where we find growth, where we're actually connecting the different capabilities that we have across what is historically been business units, where you might free up insight that sits inside of a reinsurance business and bring it to corporate clients, or how you bring human capital capability to match with our directors' and officers' capability on the risk side. So how you bring those new -- how you bring existing capabilities together in new ways to solve clients' problems. And then you've obviously got the net new growth that we're so focused on, whether it's cyber, where it's no longer just an insurance policy. You need to bring risk mitigation, risk identification, new skills to be able to provide real value to clients. Certainly, climate, how you drive better insight to give our clients an opportunity to try and manage today the issues that they're facing with climate while also investing in the future to provide new opportunities to help manage those risks. So there are issues that are happening that would be -- have been considered horizon risks that are today on everybody's front door, as we've said in the past, but also how we use our existing capabilities in new ways to drive better outcomes for clients. So we see an opportunity for growth certainly today and in the future.

Great. My second question, I'd like to ask about the M&A environment for the industry. It seems like we continue to hear lots of comments that private equity is interested in, in just about everything brokerage. And there seems to be just an endless supply of new roll-up companies, new probably roll-up companies. But it's hard to be outside in the know if that environment really is getting a lot more competitive and valuations are arising, or if it's more of a stable view. What's your take on the current environment?

So Paul, one of the things we do is we look at -- we start from client need, and we then build our M&A pipelines around the highest growth, highest margin, highest return on capital opportunities, which are really aligned with the biggest areas of client needs, whether that's health and associated benefits, whether that's delegated investment management, whether that's data analytics. And so a lot of the areas that we're actually focused in, we're actually building relationship with companies well before they go through a process. So we're not actually competing with others. And so we're building relationships with companies in areas like cyber, in areas like intellectual property, in a lot of data analytic-intensive businesses, which we're really thrilled to be bringing that capability into Aon. And we expect to do a lot more of that in 2022.

Okay, thank you very much. Appreciate it.

Next, we'll go to the line of Yaron Kinar from Jefferies. Please go ahead.

Good morning. And thanks for taking my question. Actually, it's really one question that I have here. If I look at the actual common shares outstanding, I think you ended the year with 215 million, just under -- another 2 million of the dilutive equivalents. And yet you called out, at the beginning of first period or first quarter '22, a diluted share count of 224 million, almost. Can you maybe provide some color as to why that share count will be going up?

So we have actual shares outstanding in Q4 2021 of 221.4 million. And then we have a few diluted shares, which get you to 223.7 million is the estimated Q1 2022 diluted shares.

Okay. So that's apples to oranges. Okay. And maybe could you just remind me the stock-based compensation, does that flow into adjusted EPS?

Yes, of course. So when you issue shares, you increased the share count related to stock-based compensation. And so if you think about the actual shares issued each year for the last couple of years, it's been going down substantially, while the dollar amounts of stock we issue has been remained the same. So we've been very disciplined about the granting amount we're giving out. But obviously, as the stock price increases, the dilutive impact decreases. So in 2021, as an example, we issued 1.7 million shares.

Thank you.

Next, we'll go to the line of Jimmy Bhullar from JPMorgan. Please go ahead.

Hi, good morning. So just I think there were a lot of questions about just -- or concerns about the fallout from the Willis deal. And based on your organic growth, it doesn't seem to be impacted a lot. But if you could just talk about that? And then relatedly, it seems like if I look at your expenses, the comp and benefits line is the only one that's actually up from a couple of years ago. All the other ones are down. So not sure if you're having to pay a little bit more to retain talent, whether because of inflation or just because of the deal breaking up?

Jimmy, I appreciate the question, both of them, in fact. Let's start with the first one. And when you consider and you think about our ability to maintain momentum over '22, '23, '24 and, really, over time -- and with the final momentum, by the way, because we'll be very specific as grow revenue, improve margins and grow free cash flow double digits, we believe the opportunity for Aon is very strong, in fact, unique at this point in time. And we'd start -- I think, Jimmy, just to answer your question on sort of where we're going in our future, start with our current position and our financial performance. You saw at 9% organic; margin at 30%; free cash flow, double digit; more important, colleague engagement, 80%. Voluntary attrition, by the way, is below pre-COVID levels. And then client need, as Eric was describing, as high and getting higher, but it's also evolving. And so if you think about this, Jimmy, and say, look, the momentum we have going into 2022 is exceptional, and it really is on all these fronts: financial performance colleagues and client needs. But most important, as you ask the question, you get behind what's driving that? And the actions that drove this performance are the exact same actions that build momentum, and it really is the reasons we performed now and why we're going to continue to perform in '22,'23 and '24. And it's really built on the decade of work on Aon United and especially the continued refinement and amplification over the last six months. And this is on the blueprint we've talked about before and around Aon Business Services, what we're doing on innovation, a network called Delivering Aon United, very, very systematic around the globe and our people leadership. Really, the…

Yeah, Greg, I think you covered it really well. I think the client demand question we talked about a few minutes ago. But as we work with the clients on their risk today and help plan around the risk of the future, it really is an opportunity for us to show the value of our operating model. So we can bring the capabilities of our firm to a client in the way that they want to use it and provide the insight that looks at a risk holistically, not just as an insurance risk, not just as a talent risk, but really pull all of it together at one point. And you see that in the resilience work that's being done out of our human capital and risk teams together. You see that in reinsurance risk, a couple of those different examples we talked about. But the operating model, I think, provides us with a competitive advantage that is different from what you see in the marketplace, connecting globally by using our ability to talk to clients' segments with industry backgrounds, really understanding their issues and then bringing that capability. Anybody can say it. It is absolutely critical to do it to be able to meet these needs of the future, but also having an Aon Business Services as the backbone of the firm, where we're able to leverage the data and analytics, be able to leverage our scale, provide the level of service that clients are looking for in a way that drives efficiency that allows us to invest back in the talent that you need, the new channel that you need to draw into a firm to be able to handle issues like cyber, like climate, like resilience and those types. So we feel really good that the model that we've put in place really does give us an ability to meet those needs going forward.

And then on your comp and benefits question, I think you said expenses are going up. We are absolutely investing in our colleagues. We're investing in our current colleagues, in talent and development, in wealth creation and in hiring great new talents to serve unmet client needs. And we're excited about being able to continue to do that into 2022 as well as continue to invest in growth areas across our business in the context of driving margin expansion for the full year.

Okay. And how do you think about inflation affecting your business? Obviously, to the extent the premiums go up, that helps you. But are you seeing evidence of wage inflation as well? First, if you could just comment on the positive and negative of the pickup in inflation?

Yes. We do see wage inflation in our business. We saw that in Q3. We expect that to continue into 2022. But what we would say is, while we continue to invest in our colleagues, which we think is terrific, we expect to offset that with efficiencies driven by Aon Business Services at scale. And so that offset and continued sort of efficiency there allows us to continue to drive margin expansion. One of the other macro things I might add, just while you're on inflation, is interest rates. So if interest rates were to continue to rise, that is a very positive dot for us in 3 key ways: fiduciary investment income increases, every 100 basis points in short-term interest rates, there's an increase of $60 million top line and bottom line for Aon; the second is pension liability comes down, and then the third, which you may think is a negative, but is not, interest expense and our entire debt portfolio has fixed interest, fixed rate interest, so there's no impact on debt. So inflation, we do expect, longer term, to be a positive for our business. Short term, there's sort of a wage inflation impact for sure. Interest rates is positive on 3 fronts. So we do think the macro environment is very positive for our business.

Thank you.

And for our last question, we'll go to the line of Adam Klauber from William Blair. Please go ahead.

Good morning, thanks. Historically, you've been able to increase the margin in part. I think you said you focused on high-growth, higher-margin businesses from a business mix perspective, but also you divest historically low-growth, lower-margin businesses. So on the second part, as we look at 2022, 2023, is there still a fair amount of lower growth or margin parts of the business that you could divest?

I mean what we would say is we continue to manage the portfolio actively and continue to invest in higher revenue growth, higher-margin businesses. We will continue to divest lower revenue growth, lower-margin, low return on capital businesses. I think there's fewer of them left in the portfolio. So you saw us do that with the Retiree Health Care Exchange business in Q4, but there's also a huge opportunity with Aon Business Services to invest and prove the efficiency and therefore, increase the margins of the existing businesses to help them scale globally in much more efficient ways and to scale innovation in more ways. So yes, we'll continue to be an active manager portfolio, but Aon Business Services is probably a much bigger lever for us in driving margin expansion going forward.

Kind of this is also a very dynamic conversation. Every year, every situation evolves over time. And it's led to a 30% margin, which we believe, as Christa described very clearly, with real, real upside over time as we move through that. But also, if you could call out return on invested capital, this process has led to 27% in change return on invested capital, which is really a phenomenal outcome in terms of sort of what it's been able to do. So it served us well. And businesses that were in the performing category 2 or 3 years ago, we have to continue to improve, and we're looking for ways to do that. So this is really not just about the static but about the dynamic and how it evolves over time. And that the process that Chris and the team has set up has really served us well. I think because there's probably like more like on the return on invested capital side, almost like 1,500 basis points over the last 10 years, surpassing even what we've done on margin.

Okay. And then just one follow-up. On the Health Solutions business, you did quite well this year. From what I understand, that business has been impacted in that business across the market, has been impacted by some HR managers being very, very busy during COVID and not always having the time to be more offensive, do more discretionary projects. Are you seeing sort of that macro environment beginning to turn? Are HR managers getting more engaged, what they do more for the workforces as we go into 2022?

Adam, we really are -- the activity has been -- has done dramatic and this continues to increase. And whether it results in sort of revenue now or revenue in the future, the opportunity to work with people leaders and our clients around the world, it's just exceptional. And as you highlight, the demand is tremendous, not just for the sort of literally the here and now and what you do day-to-day to support employees, but also as you think about resilience, all things workforce and talent. So we love the space overall from a talent and a health standpoint. While it also ties into what's going on, on the retirement side, and I think helping employees really be more effective as leaders, as humans, in terms of what they do every day beyond just a specific benefit line. So we're seeing - we see tremendous opportunity on the health side everywhere around the world, not just in the US. And as Eric described before, it connects with demand in other areas that touch employees, like retirement and all aspects of that.

Greg, maybe one just quick comment. I think the -- when we talk about our own colleagues as the whole person, but it's not just the professional side, but certainly the well-being side, that absolutely is playing out right now with all of our clients. There's also a desire to understand, on a global basis, what their benefit programs look like, how you harmonize those. And this global benefit strategy that corporations are doing really is designed to free up talent, to be able to move talent across borders to meet opportunities. And so that is a building part of what a human resource person is looking at. And I think it also fits into the talent piece of trying to use their talent, where they're best able to drive value for the company, but also for the individual or career opportunities as well.

All right. Thank you very much.

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

Thanks very much. I just want to say, on behalf of Christa, Eric and I, thanks very much for joining this quarter and look forward to our discussion next time. Take care.

That concludes the Aon plc's Fourth Quarter and Full Year 2021 Conference Call. Thank you for joining, and have a great rest of your day.