AON Shareholder/Stockholder Letter Transcript:
April 2024
To Our Shareholders:
As we reflect on 2023, we observe that trends around client demand increasing volatility, complexity
and interconnected risk and people issues have continued to accelerate.
These are not new trends, but long-standing and long-observed challenges for our clients, who have
demanded that we go further, faster, to deliver better solutions on our Aon United strategy.
More recently, we have observed that this volatility and complexity are driven by a series of profound
transitions across four megatrends:
Trade and the consequence of sustained geopolitical uncertainty, the sustainability of
globalization and supply chain resilience;
Technology including the rise of artificial intelligence and ongoing, accelerating innovation,
which raise questions about business strategy and workforce requirements;
Weather reflecting the rate of natural catastrophes, which is forcing organizations to
manage risk more holistically and consider the impact of physical risk and natural disasters,
regulatory changes and emerging green technologies; and
Workforce and the long tail of the pandemic, which has fundamentally impacted employers
talent agendas, as they seek to attract and retain talent with a compelling employee value
proposition and address health care, financial wellness, and overall wellbeing needs
differently to maximize return on investment.
These forces among others have changed the stakes in our battle for relevance with clients,
requiring current leaders to deliver against today s expectations and evolve to make better decisions
on new challenges. For Aon that means continuing to take steps to evolve our firm to:
Create innovative new solutions that address these emerging risk and people challenges;
Accelerate the use of predictive analytics to deliver new insights and unlock access to new
forms of capital; and
Focus on the growing demand for integrated solutions that tackle risk and people challenges
together.
This is Aon United designed to help our clients be better informed, better advised, and make
better decisions.
In 2023, we took steps to accelerate this strategy, articulated in our 3x3 Plan, and centered around
three commitments that we will deliver over the next three years:
First, we will leverage our Risk Capital and Human Capital capability to unlock new, integrated
solutions across our core businesses. The steps we ve taken to enable our Risk Capital and Human
Capital capabilities are changing the conversations with our clients, as we enhance our tools to provide
a deeper understanding of risk and people, in terms of the underlying risks, root causes, and
translation to business and financial outcomes. We re also bringing data and analytics together across
Aon. For instance, in Risk Capital, we have opportunity to deliver balance sheet and climate analytics
from Reinsurance to our Commercial Risk clients, at scale. Our analyzer tools enable clients to better
evaluate internal and external risk drivers, potential losses, their risk tolerance, total cost of risk, and
financial impacts. Similarly, in Human Capital, we are using insights from our deep experience and
analytic capabilities on health, engagement, rewards, and wellbeing, to offer clients more complete
solutions that drive return on investment against their employee value propositions.
Second, we will embed the Aon Client Leadership model across the firm, delivering relevant
solutions for clients of all sizes. This model is designed to bring the full force of our global advice, data
and analytics, and insight to our clients, tailored to their industry, geography, and size, and delivered
locally.
We also took a further step to deliver innovative and accretive new products into the middle market by
announcing our definitive agreement to acquire NFP, a leading middle market property and casualty
broker, benefits consultant, wealth manager and retirement plan advisor. The acquisition will
strengthen our ability to bring stronger analytics and innovation to this space, enabled by our Aon
Business Services operational platform and delivered through our Aon Client Leadership model.
Third, we will build on Aon Business Services to set a new standard of innovation and client service,
while driving enhanced experience for our clients and colleagues, and enabling further growth. In late
2023, we doubled down on this plan by announcing a $900 million cash restructuring charge to
accelerate Aon Business Services as a catalyst for our 3x3 Plan and to complete workforce strategy
efforts that reflect our simplified and more connected go-to-market strategy.
These are the elements of our 3x3 Plan, driven every day by our colleagues, who continue to work
together on behalf of our clients with conviction, clarity and commitment. We continue to support them
with the resources and tools they need, enabled by Aon Business Services, to deliver results for
clients, and we also support them with tools and commitment to wellbeing and inclusion, guided by
continuous feedback such as our annual all-colleague support survey. This continuous investment in
talent ensures we remain well positioned to deliver on our Aon United strategy.
Our Long-Term Financial Results and Shareholder Value Creation
Our ability to continue to help clients address their biggest challenges and capture opportunities is
what ultimately drives our firm s financial results. Our strong performance in 2023 is the direct result of
deliberate steps we have taken on our Aon United strategy, which we are accelerating with our 3x3
Plan to deliver Risk Capital and Human Capital at scale through Aon Business Services and our Aon
Client Leadership model.
These steps drove strong top and bottom-line results and position our firm to continue to deliver
ongoing performance in 2024 and over the long-term against our key financial metrics: organic revenue
growth, margin expansion, earnings per share growth, and free cash flow growth. Our results continue
to build on the progress we ve made over the past decade-plus on key value creation metrics, including
return on invested capital (ROIC) and capital returned to shareholders, and ultimately contribute to total
shareholder return.
Our results in 2023 build on our long-term track record1,2:
12-Year Performance2
2023 Performance
Shareholder Value Creation
Key Financial Metrics
Organic Revenue Growth
1
2
+7%
Adjusted EPS
$14.14
Adjusted Operating Margin
31.6%
Organic Revenue Growth
Adjusted Margin Expansion
+80 bps YoY
Average / Year
+4%
+1,265 bps
Free Cash Flow (FCF)
Adjusted EPS Growth
FCF Growth
~100 bps / year
$3.2B
+11%
+11%
+6% YoY
+5% YoY
CAGR
CAGR
FCF Margin
ROIC
FCF Margin Expansion
Increase in ROIC
23.8%
33.1%
+1,610 bps +2,090 bps ~39%
Share Repurchase
$2.7B
Shares Count Reduction
~130 bps / year
~170 bps / year
Net Reduction of Outs. Shares
Dividend Growth
Dividend Growth
Share Repurchase
Capital Returned
+10%
+12%
$24B
$29B
$0.615 Quarterly / Share
CAGR
Through buyback and dividend
Organic revenue growth of 7% in 2023 was driven by ongoing progress in delivering client
value with continued improvement in our core businesses, portfolio mix-shift towards areas of
faster growing client demand and data-driven solutions, and net new opportunities that
increase our total addressable market. This is a direct outcome of our Aon United strategy
and contributes to our track record of +4% average annual organic revenue growth from 2011
to 2023.
Adjusted operating margins expanded to 31.6%, continuing our long-term track record of
sustainable margin expansion net of long-term investment for growth, enabled by revenue
growth, shifting our portfolio mix to higher growth and higher margin businesses, and
leveraging our Aon Business Services platform. Since 2011, we have expanded margins by
1,265 basis points, an average of ~100 basis points per year.
Adjusted earnings per share from continuing operations were $14.14, reflecting growth of 6%,
overcoming a headwind from non-operating expense, and demonstrating strong operational
performance and effective capital management, contributing to a 11% CAGR since 2011.
We generated $3.2 billion in free cash flow, contributing to an 11% CAGR since 2011. Our
long-term outlook continues to be strong. We remain focused on maximizing the translation of
revenue into free cash flow and on double digit free cash flow growth over the long term, as
demonstrated by 2023 free cash flow margin of 23.8%.
Organic Revenue, Adjusted Operating Margin, Adjusted Earnings Per Share, Free Cash Flow, Free Cash Flow Margin and
Return on Invested Capital are non-GAAP measures, which are reconciled to their corresponding GAAP measures for the
periods presented in the Appendices to this Annual Report to Shareholders
Long year track record reflects 12-year performance since 12/31/2011
4/29/2024 Letter Continued (Full PDF)