AON Q2 2022 Earnings Call Transcript

Participants

Corporate Executives

• Greg Case, Chief Executive Officer
• Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance
• Eric Andersen, President

Analysts

• Elyse Greenspan, Wells Fargo & Company
• Jimmy Bhullar, JPMorgan Chase & Co.
• Paul Newsome, Piper Sandler Companies
• David Motemaden, Evercore ISI
• Meyer Shields, KBW
• Rob Cox, The Goldman Sachs Group, Inc.
• Weston Bloomer, UBS Group AG

Presentation

[Operator]

Good morning, and thank you for holding. Welcome to Aon plc's Second Quarter 2022 Conference Call. [Operator Instructions]

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 second quarter 2022 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. Thank you, sir. You may begin.

[Greg Case, Chief Executive Officer at AON]

Thank you, and good morning, everyone. Welcome to our second quarter conference call. I'm joined by Christa Davies, our CFO; and Eric Andersen, our President.

I think, previous quarters we posted a detailed financial presentation on our website. We begin by expressing our deepest appreciation for our colleagues. Their extraordinary dedication delivering results for clients, bringing the best of Aon from across geographies and solution lines is inspiring. And their passion and commitment are reflected in highest ever colleague engagement recorded in our latest report survey.

In the second quarter, our colleagues delivered excellent results demonstrating continued momentum and progress against our key financial metrics. Organic revenue growth is 8% in Q2 and year-to-date. On top of 11% in the prior-year quarter, consistent with our ongoing financial guidance of mid-single digit are greater organic revenue growth. This top-line strength translated into an adjusted operating margin of 26.2% in the quarter, up 40 basis points from last year and adjusted EPS growth of 15%, demonstrating the strength of our Aon United strategy and Aon Business Services platform.

Turning to revenue, commercial risk delivered 7% organic revenue growth, driven by ongoing strong retention and renewals highlighting the strength of our core business and strength in areas of investment like CoverWallet within digital client solutions. In addition, external trends like inflation, continue to be an opportunity for us to help ensure clients are covered for increased exposure.

Reinsurance delivered 9% organic revenue growth in a dynamic renewable market. Our team brought the full capability of our firm's data, analytics and expertise, resulting in strong retention and net new business generation. Health Solutions delivered 11% organic revenue growth, with strong growth in core health and benefits driven by client demand, decreasing healthcare costs and continued growth in advisory work related to regulatory changes, well-being and resilience.

Within Human Capital Solutions, demand remains very high. It's for clients with advice and solutions, especially as they manage ongoing return to work plans, a highly competitive talent market, wage inflation and employee well-being. Finally, Wealth Solutions delivered 3% organic growth, as our team continue to deliver results in core retirement and investment solutions with ongoing additional work helped clients address regulatory changes and impact from recent market conditions, like the opportunity for pension risk transfer. Across wealth and health, external factors are increasing client cost, making it more important than ever for them to efficiently provide comfortable benefits for their employees.

Overall, our strong performance in Q2 and year-to-date reflects the strength of our core business across regions and solution lines. While there is uncertainty around external economic factors, some of the trends that challenge with our economy are positive for our business and create opportunities to help clients. For the full year, we remain confident in our ability to deliver results in each of our three financial commitments. Mid-single digit or greater organic revenue growth, margin improvement and double-digit free cash flow growth.

On the topic of innovation, among many categories of investment, we'd like to highlight two areas where clients are demanding new or better solutions and we are making meaningful progress and serving them. Intellectual property and Climate. On IP, our intellectual property solutions team is delivering a first-of-its-kind solution that enable entrepreneurs to fund IP rich startup growth businesses without giving up ownership using debt that is backed by insured IT assets. Q2 marked an exciting milestone as the team crossed the $1 billion threshold and IP back insurance and hence debt financing.

Let me highlight one recent opportunity where our team supported a high growth technology hardware company. Given the company's business model and growth stage, it had multiple funding avenues available. The company chose this solution to meet its growth capital needs, minimizing equity dilution. The $100 million transaction allowed the company to secure its financing for growth while insurance markets were able to downside risk growth with an innovative application to an intangible asset class.

Going forward, we're making progress to increase the number of lenders and insurance carriers participating in that solution as we build client awareness, accelerate distribution and continue to scale this business. One additional note, as current and evolving economic conditions may compress equity-driven valuation, IP back debt provides a potential new option for start-up growth clients to protect equity ownership and forgo potential down-round funding.

On climate, our turn aim is working on many initiatives. Today we will highlight two. Aon works on Aon and our work supporting renewable energy investment. We'll start with our progress on Aon's journey to zero carbon. In March of 2021, we made an industry-leading commitment to be net zero by 2030, in alignment with Science based targets with Scope 1, 2 and 3 emissions. We're pleased to report that we made great progress so far and reduce our 2021 carbon emissions 12% from our 2019 baseline. As we decarbonize our supply chain, reduced our real estate footprint with smaller, linear space and reduce travel in part with the impact of COVID-19.

Our recent ESG impact report details our commitment and actions on climate, as well as other ESG topics, which are embedded in our overall strategy. Through our clients, this comes down to helping them understand and quantify their climate risk. We prepared to communicate report on this risk and do something about it by building resiliency, positioning in a lower carbon and investing in transition.

Given our track record, underwriting new risks and developing proprietary valuation models, paired with our climate analytics, data and partnerships, we're very well positioned, our clients quantify current and potential future risks, which we can then help them mitigate and transfer. For example, in renewable energy alone, onshore and offshore wind investment exceeds $70 billion today and could grow to nearly $400 billion by 2030. Another rapidly growing addressable market that we serve with meaningful solutions today to ensure the construction and ongoing operation of these facilities.

Similarly, in solar, there is $45 billion of investment today in construction, manufacturing and technology development and we expect this investment to grow to over $100 billion by 2025. Recently, our team facilitated a placement from the world's largest solar farms required in Aon United after the across commercial risk and reinsurance to obtain coverage, despite challenging market conditions. As these renewable energy products projects continue to grow in size, scale and complexity, the need for expertise and innovation and existing technologies will only increase.

Further innovation in areas like carbon capture and storage, hydrogen and other new technologies will require even more innovation to enable the risk financing necessary to make these projects more economically attractive. Our ability to reduce risks for new solutions help to bring in new investment and ultimately helps enable continue boost for decarbonization.

In summary, we delivered a strong quarter, demonstrating continued operating momentum and progress in our key financial metrics. Our Aon United strategy and operating model supported by Aon Business Services places us in a very strong position to support our clients as they face changing economic conditions. In addition, our colleague engagement is very high. As our team delivered on a strategy that enables us to achieve results today, both in the core and in priority growth areas, while also investing in innovative new client solutions like intellectual property and climate.

Finally, our strong performance in Q2 and year-to-date reinforces our commitment to achieving our financial objectives for the year. Now, I'd like to turn the call over to Christa for thoughts on our performance and long-term outlook for continued shareholder value creation. Christa?

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

Thanks so much, Greg and good morning everyone. As Greg highlighted, we delivered continued progress in both the quarter and year-to-date. Through the first half of the year, we translated 8% organic revenue growth into 50 basis points of adjusted margin expansion and double-digit adjusted earnings per share growth. We look forward to building on this momentum through the rest of 2022.

As I reflect on our performance through the first half of the year, as Greg noted, organic revenue growth was 8% in both Q2 and year-to-date. We continued to expect mid-single digit or greater organic revenue growth for full year 2022 and over the long term.

I would also note the reported revenue growth of 3% in Q2 and 4% year-to-date includes an unfavorable impact from changes in FX, primarily driven by a stronger US dollar versus most currencies and fiduciary investment income of $7 million in Q2 and $9 million year-to-date. Further, I know we are uniquely well positioned with respect to current economic conditions. Inflation increases in share values, which have a positive impact on our business and we continue to see modest tailwind in some insurance pricing which remains stock strong. Interest rate increases benefit cost to a fiduciary investment income and reduced pension liabilities. Broadly as Greg mentioned, volatility makes the solutions when advice we offer around risk and people even more valuable to our clients. For instance, in areas like workforce resilience and pension de-risking.

Moving to operating performance. We delivered strong operational improvement through the first half of the year, with adjusted operating margins of 32.7%, an increase of 50 basis points, driven by organic revenue growth and efficiency of Aon Business Services platform overcoming expense growth, which includes investment in colleagues, technology to drive long-term growth and some ongoing resumption of T&E.

Looking forward, we expect to deliver margin expansion in 2022 and over the long term, as we continue our track record of cost discipline and managing investments in long-term growth on ROIC basis. As we've previously communicated, we think about margins over the course of the full year. We expect continued investment in colleagues and ongoing resumption of T&E throughout the year. Our Aon Business Services platform continued to be a key contributor to margin expansion and represents a competitive advantage, especially in high inflationary markets, while our Aon Business Services platform continues to enhance our ability to scale innovation and unlock growth opportunities, it also supports continuous improvement as we automate day-to-day processes around the firm. For instance, our Aon Business Services and commercial listings force automation opportunity to certificate of insurance.

We're now using automation to locate extract and validate the data, rather than manually pulling it some emails and attachments. Over the year, just to save our North American chain, I see 3,000 workouts, representing a 30% reduction in total time spent, processing service request to certificates of insurance before further enhancement. We're delivering high quality client service and enabling our colleagues who spend more time on higher value-added activities and improving colleague engagement.

Our Aon Business Services platform enables us to find and capture efficiency opportunities like this around the world and remains a key driver of ongoing efficiency improvements and margin expansion. We translated strong adjusted operating income growth into double-digit adjusted EPS growth of 15% in Q2 and 14% year-to-date.

As noted in our earnings materials, FX translation was an unfavorable impact of approximately $0.10 per share in Q2 and $0.29 per share year-to-date. It consider and remain stable at today's rates, we would expect an unfavorable impact of approximately $0.11 per share in the second half or approximately $0.04 in Q3 and $0.07 in Q4 of 2022.

Turning to free cash flow and capital allocation. Free cash flow decreased 17% year-to-date to $1,063 million, primarily driven by higher receivables as well as higher incentive compensation payments, given our strong 2021 financial results as we described in Q1, offset by strong operating income growth. As we communicated before, free cash flow can be lumpy quarter-to-quarter and free cash flow generation in the second half of the year is seasonally stronger than the first half. We continue to expect to deliver double-digit free cash flow growth for the full year 2022.

Looking forward, we continue to expect to drive free cash flow growth over the long-term driven by operating income growth and working capital improvement. Given our strong outlook for free cash flow growth in 2022 and beyond, we expect share repurchase to continue to remain our highest return on capital opportunity for capital allocation. We believe we are significantly undervalued in the market today highlighted by approximately $500 million of share repurchase in the quarter and $1.3 billion year-to-date.

You can also expect to continue to invest organically and inorganically in content and capabilities to address unmet client need. Our M&A pipeline continuously put on our priority areas, that will bring scalable solutions to our clients growing and evolving challenges. We will continue to actively manage the portfolio and assess all capital allocation decisions on an ROIC basis.

Now turning to our balance sheet and debt capacity. We remain confident in the strength of our balance sheet and manage liquidity risk through a well-out of debt maturity profile. As we've said before, we'll continue to add debt as EBITDA grows, while maintaining our current investment grade credit ratings. Thinking about interest rates, I note that, our term debt is all fixed rate with an average interest rate of approximately 3.8% and a weighted average maturity of approximately 12 years. I'd also note that our pension liability improves as a freight increase and historically, we've taken steps to dealings of liability and reduce volatility.

In summary, our strong financial results in the quarter and year-to-date demonstrate continued momentum and progress against our key financial metrics. While we're seeing signs of economic uncertainty, we remain confident in the strength of our firm announced financial guidance for 2022. Overall, our business is resilient and our Aon United strategy gives us confidence in our ability to deliver results in any economic scenario.

With that, I'll turn the call back over to the operator and we'd be delighted to take your questions.

Questions and Answers

[Operator]

[Operator Instructions] Our first question comes from the line of Elyse Greenspan with Wells Fargo. You may proceed with your question.

[Elyse Greenspan, Analyst at Wells Fargo & Company]

Hi, thanks. Good morning. Last quarter on your conference call, you guys had alluded to if you go into a recession, there could be an impact on the discretionary pieces of your business, which I believe is around 20% of your revenue. I was just hoping for you guys to expand just upon, we do go into recession later this year or '23. How that could impact revenue in Aon? And I'm assuming like right now in the growth you saw in the quarter, you're not seeing any signs that were folded down this year?

[Greg Case, Chief Executive Officer at AON]

Elyse, maybe I'll start with that and go to Eric and Christa as well. We try to convey last quarter with this reinforces this quarter. As we look at the world as it stands and is evolving, we're in a very unique place incredibly well positioned and it really shows through. In the first quarter, some during the second quarter, we expect through the year and into 2023.

You look at growing risk across the board. Clients are looking at their current businesses of course, but going risks around supply chain and climate cyber resilience, people aspects. All these things are areas, we have a great opportunity to support clients and that's coming through and it really comes through across the board on our core book of business and also our investment part of our business.

And then the underlying pieces that I talked about inflation and interest rates as Christa described of a positive impact on our business. And finally, Aon Business Services enables us to react and implement solutions globally, while continue to operate and invest efficiently. So you're seeing us do what we do. We improve and drive mid-single digit or greater organic growth, margin improvement, free cash flow of growth of the double-digit level. So that's what we want to convey and make sure you understand sort of where we look as we think about the global economy.

But Eric, anything else you would add from a client standpoint?

[Eric Andersen, President at AON]

Sure, Greg. I would say, look, Elyse, it's a great question. And areas of growing risks, like climate change, geopolitical uncertainty, all have a major impact, changing regulation on areas like wealth the focus on workforce resilience, well-being, challenging talent market, you go on and on, health care costs, all issues that our clients are facing irrespective of broader economic conditions.

I would also say, the Aon United model that we've built is actually built for moments like this, where our teams are integrating together trying to come up with innovative solutions for clients in a way that pulls all the different capabilities of the firm and can deliver it in one unified fashion. So we think the world isn't getting any less risky. And so the opportunity is there for us to continue to grow our business.

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

And Elyse, I'd just add that many of the underlying drivers of GDP, as Greg highlighted, positively impact our business. We've talked about market impact, which has really made up of two components: insurance pricing, which provides modest tailwinds to growth and remain strong; and inflation, which increases insured values, exposures, wages, medical costs, some asset value, all things that positively correlate with our revenue and offset potential pressures while on GDP.

We've also mentioned that interest rates have a positive impact on our business through fiduciary investment income. Each 100 basis point increase in interest rates is $60 million top line and bottom line for us. It also decreases our pension unfunded liability, which decreases cash contributions to pensions. And finally, our investment Aon Business Services continues to drive efficiency and support growth while helping mitigate inflationary impacts on our own cost base. So we're very confident of these trends, and the fact that volatility actually creates challenges for other industries that really creates opportunity for us with clients, as Greg and Eric has highlighted.

[Elyse Greenspan, Analyst at Wells Fargo & Company]

That's helpful. And then my second question, Christa, in your prepared remarks, you talked about the slowdown in free cash flow to start the year and mentioned like receivables as part of the reason. So as you think about the back half of the year, do you think cash flow is going to be strong enough that you'll hit the double-digit target this year? Well, I think [Indecipherable] into double-digit growth for 2022?

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

We are certainly confident about achieving double-digit growth for 2022, Elyse. And we absolutely -- as you described, second half cash flow is always stronger than first half cash flow. And first half was really impacted by two things, higher receivables, which is really due to stronger organic revenue growth. I would note, by the way, DSO was actually flat. So we're keeping up, but we're not accelerating that, and we have a plan to accelerate and collect receivables much faster. And it was also impacted by incentive compensation payments from a very strong 2021 performance, which is exactly what we had been doing in rewarding our colleagues.

And so we're very confident about double-digit free cash flow growth for the full year 2022 and beyond, 2023 and beyond. So we've got a very strong free cash flow outlook, and we're really excited about deploying that organically in M&A and in share repurchase, which is our highest return on capital opportunity across Aon [Phonetic].

[Elyse Greenspan, Analyst at Wells Fargo & Company]

Great. And one last quick following thing. The other income line, you did see gains a couple of quarters in a row in some business sales. Should we model that going forward? I know in the past, you told us just to assume kind of zero for that line on an ongoing basis.

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

We would assume zero to that line on ongoing basis, Elyse. But you saw in this quarter was us continuing to manage the portfolio as we do. We continue to invest in higher revenue growth, higher margin, high return on capital opportunities and we continue to divest. And it is a small divestments in lower revenue growth, lower-margin, low-return on capital opportunities. And so, I would continue to model zero going forward.

[Elyse Greenspan, Analyst at Wells Fargo & Company]

Okay, thank you.

[Operator]

Our next question comes from the line of Jimmy Bhullar with JPMorgan. You may proceed with your question.

[Jimmy Bhullar, Analyst at JPMorgan Chase & Co.]

Hi, good morning. I had a couple of questions. First on margins, you mentioned you expect improve margins in 2022 and thereafter. I think seasonally second half should be weaker than the first half, but would you expect to improve margins in the second half as well, but a potential increase in T&E versus last year and maybe some inflationary pressures, if you're seeing them?

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

Thank you so much for the question. We absolutely agree that we are focused and committed to expanding margins for the full year 2022. We don't give margin guidance by quarter. We've certainly seen very strong 50 basis points of margin expansion in the first half of the year and we expect the full year margin expansion driven by organic revenue growth, our portfolio mix shift to higher revenue growth, higher margin areas and our continued productivity benefits through Aon Business Services, which I mentioned specifically in our prepared remarks. So, again, completely committed to full year 2022 margin expansion.

[Jimmy Bhullar, Analyst at JPMorgan Chase & Co.]

Okay. And on fiduciary investment income. I think, theoretically, obviously, it's understandable how it should pick up. But rates have been high for a while now and we haven't seen too much of a pickup. So I'm just wondering if you could comment on the expected lag and what the outlook is for fiduciary investment income, if interest rates stay around current levels, maybe a year, two years from now?

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

Yeah. So as I mentioned in my prepared remarks, every 100 basis point increase in interest rates, and this is the short end of the curve is $60 million top line and bottom line for us. I'd note that our assets in terms of investments on behalf of plants [Phonetic] are about 55% in the US and 45% outside the US. Our position investment income for Q2 was $9 million and so it is increasing as interest rates rise.

[Jimmy Bhullar, Analyst at JPMorgan Chase & Co.]

Okay, thank you.

[Operator]

Our next question comes from the line of Paul Newsome with Piper Sandler. You may proceed with your question.

[Paul Newsome, Analyst at Piper Sandler Companies]

Good morning. I want to follow up on leases question about the economic sensitivity, and maybe you could just kind of remind us and contrast with sort of the Aon today versus the Aon of past recessions? If we look back and why would the business mix be -- why is the business mix be materially different, and how should we think about sort of the relative sensitivity today versus not? It's still any sort of magnitude would be very helpful?

And then kind of as a follow-up as we think further in the M&A. Does the M&A strategy change in anyway because of the recession or desire to change of economic sensitivity?

[Greg Case, Chief Executive Officer at AON]

Paul, let's me take both of those two big categories, both important. On the first piece, when we talk about mix, Eric's point around how we approach our clients around Aon United is fundamentally different and evolving and getting stronger and stronger. We're bringing the core capability of our firm to clients every day. And that really does enhance our ability to grow in the core, but also bring new solutions and ideas to them and also solutions ideas which connect across areas, meaning we're connecting things in D&O with our people business in the ways we haven't done before. That fundamentally changes the risk costs for clients sort of in the D&O world with that piece. That's really cuts across the solution lines.

And what we're trying to convey and why we're confident in mid-single-digit or greater growth across all the environments Chris had described is this capability, fundamentally different than it's ever existed before. And we've been working on it for quite some time, and it's really -- it really is reinforced in client and outlook variable to serve clients. So it's exceptionally positive, which is why, as I said before, we're confident, mid-single digit for the year and over time. But it really does show up at a client level. And there are aspects that are discretionary, but those change over time and evolve over time. Overall, the client service leadership capability just continues to strengthen. But additional thoughts and views?

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

Thanks so much, Greg. And Paul, what I would add is if you go back to 2008 to 2010, that was really the worst economic environment you could design for a company like Aon. It was a global economic recession without inflation and without interest rates, which is pretty unusual. And during 2008 to 2010, Aon grew organically over those two years, our reported revenue grew 6% CAGR over those two years. We expanded margins by 250 basis points, and we grew free cash flow very strongly.

And we would say in this environment, there are three things that make us stronger than that performance. The first is inflation, which has a positive impact on our revenue, as I described, increasing asset values, employment levels, revenue, etc. The second is interest rates, which has a positive impact on fiduciary investment income, as I mentioned, $60 million top line and bottom line for a 100 basis point increase in interest rates. And the third, as Greg highlighted, is our investments -- and Eric highlighted, is our investment in Aon United, which allows us to bring together capability to serve clients who, in times of volatility, need us more, whether that's workforce resilience, pension derisking, supply chain, climate, a number of different areas. So we feel very good about our ability to navigate through, which is why we're reiterating the guidance we have for full year 2022 and beyond, with single-digit organic revenue growth, margin expansion for the full year and double-digit free cash flow growth.

[Greg Case, Chief Executive Officer at AON]

And so, maybe if we could take a minute, and then Paul, come back to your other question also equally important around M&A what we're up to and how we're thinking about it. We are seeing evolving market it's terrific. But maybe it's helpful to start Christa with you on this overall on capital allocation, how we're thinking about it because there is really opportunity on the M&A front, but elsewhere. And then, Eric, some examples that we're seeing and some things we've done recently.

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

Absolutely. And look, I'll just say firstly, Greg, our M&A pipeline is really strong. And we are continuing to invest organically and inorganically in areas of great growth and great margin expansion, data analytics with Tyche, digital with CoverWallet, a number of other areas across our business, where we're seeing enormous client need, supply chain, workforce resilience, climate, etc.

And then I would say we continue to operate in a very disciplined way on return on capital. So as we generate very strong free cash flow for full year 2022, we expect our highest and best use of cash will remain share repurchase because we remain undervalued today. We remain undervalued at our peak pricing of 350. And so we continue to invest in share repurchase because it remains the highest return on capital opportunity across Aon. And for us to invest in M&A or organically in any of these very, very attractive opportunities, it has to be share repurchase because that's the bar. But Eric, you are in the middle of a lot of the great investments in our business and including in M&A, maybe you can talk a little bit more about this.

[Eric Andersen, President at AON]

Sure, Christa. And maybe I'll just touch on the Tyche platform that we acquired just as a way to tie some of these pieces together. And for those that remember, Tyche was really about enhancing the capability around capital modeling that we do around reserving and pricing, predominantly for the life and non-life business on the reinsurance side. But ultimately, where we see it going over time is how we extend the platform beyond insurers to corporate clients as many of these large corporates with big balance sheets are looking to optimize their own risk strategies across insurance, captive, self-insurance, etc., and need better information to be able to do it. So the ability to add that team and that talent to be able to provide that existing impact to our insurance clients from reinsurance angle, but then use that capability across the broader firm is one of the areas of why we were so interested in Tyche.

And it's also just worth saying that once you acquire an asset like that, getting them involved in the Aon United mindset, how we actually integrate them and leverage their capabilities across a broader firm has been what we've been working on over the last couple of months and I think just build confidence in our ability to use that kind of capability across the broader firm.

[Paul Newsome, Analyst at Piper Sandler Companies]

Great, thank you for your help. As always appreciate it. Congratulations on the quarter.

[Greg Case, Chief Executive Officer at AON]

Thanks, Paul.

[Operator]

Our next question comes from the line of David Motemaden with Evercore ISI. You may proceed with your question.

[David Motemaden, Analyst at Evercore ISI]

Hi, good morning. Christa, last quarter, you made some commentary around the discretionary parts of your business. I was just wondering if you can talk about what you're seeing in terms of leading indicators of demand on those discretionary businesses, specifically in the second quarter?

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

Sure. So look, what you're seeing, David, is very strong growth across our business, 8% growth in the quarter, 8% growth year-to-date. And we're reiterating guidance of mid-single-digit or greater organic revenue growth for the full year, exactly the outlook we started the year with. So we continue to see strong areas of demand from clients in the core and in the discretionary areas, really, David, because in times of volatility, a lot of the services we're offering clients are in greater demand. And so whether that's supply chain volatility; whether that's market volatility, which is creating opportunities for pension derisking, attention buyout by end; whether that's workforce resilience with that supply chain, there are so many areas of increased demand from clients in times of disruption.

[David Motemaden, Analyst at Evercore ISI]

Got it. Okay. That's helpful. And Greg, last question I'd ask -- or last quarter, I had asked a question around just new headcount, and you spoke more about focusing on productivity. And I think on this call, Christa, you made some interesting comments on just how Aon Business Services is helping enhance productivity. So I'm wondering if you could just help me think about -- are there any metrics you look at internally just on producer productivity? And maybe you can just share how much those have increased over the last several years and sort of the outlook going forward, just on producer productivity.

[Greg Case, Chief Executive Officer at AON]

David, thanks. We love the question around talent. It's the heart of our firm. Everything we do comes back to our colleagues as they support clients. And we continue to invest very substantially in attracting and retaining talent. And it's been the strategy for forever at Aon and continues to be.

But as Christa described and I described, we are investing in capability to do that more effectively. So yes, last time, we talked about productivity. Productivity for us is helping our colleagues do more with clients. They love it. When they consider across the table and allow a client on new ideas, it's a tremendous outcome. And we are developing content capability that makes it easier and easier for them to do that. So yes, not just bringing talent in, but making talent better, not just bigger, but better. And it really is at an individual level working to do that.

It's why, as I described in Q2, we recorded the highest-ever engagement we've ever had from our poll survey. So you see that from the standpoint of how colleagues are reacting to that. And our volunteer attrition, for example, is way back in line with where it was pre-pandemic. So all things are coming together very, very positively and continue to reinforce each other from an overall talent perspective. And we'll take energy and efforts to sort of make investments, wherever we need to, to support our business and to support our client leadership.

Eric, you're leading us every day at a talent level, it's so fundamental. What do you see?

[Eric Andersen, President at AON]

Thanks, Greg. It's a great question and one that's really important to us and we spend a lot of time on. And we have been making investments, which are really exciting. I would say they come in like three buckets. The first is we're investing in client leadership, especially people who have industry focus and deep understanding of client-specific challenges. We're also investing organically in some of the areas we've been talking about, like climate, cyber, IP, analytics, all the areas where we think we can add real value to clients and need expertise to be able to provide that value. And then the third, and we talked a little bit about it with Tyche, but CoverWallet, the same through M&A, we're bringing in expertise not only from a people perspective but a technology perspective as well.

And then critical to, I think, Greg, just picking up on your last point, making sure that we embed that talent in the firm, so that the broader firm can use it and leverage it with their clients, using that Aon United model to get that talent across all types of clients around the world is critical, but really focused on making sure we've got the best talent in the industry. And I think we're making great progress.

[Greg Case, Chief Executive Officer at AON]

I mean, Eric, two great examples as you sort of go back in time, we're talking now CoverWallet and Tyche. But if you go back in time, the investments we made in cyber have been phenomenal, both on the acquisition front and M&A front. It's put us in an unbelievable position to serve clients today in a category.

Also go back to 601 [Phonetic], we haven't talked about on these calls for quite some time a few years ago. Now we've evolved with what was a truly world-class capability and the 200 colleagues working on intellectual property. And we put the example out today on sort of after a number of years, sort of what we're seeing, $1 billion now across the threshold on IP debt. So these are all the things that we think are fundamental, David, to come into this. And we track it carefully, as you might expect, and we're seeing results in progression.

I do want to just touch on the Aon Business Services and did Christa highlight that again, too, because that also is an area that helps us scale capability that reinforces talent. So Christa, do you want to talk about ABS for a minute?

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

Yeah, look, a really important part of our talent strategy is Aon Business Services. As you've heard us say before, it's not just driving efficiency but enabling us to increase growth and scale innovation much faster. And for the power of Aon Business Services will enable to drive efficiency in our core operations, which helps offset the trends we see around wage inflation, enabling us to continue to invest in talent and people, which drive long-term margin expansion. So we're really excited about Aon Business Services, helps us accelerate Aon United.

[David Motemaden, Analyst at Evercore ISI]

Okay, great. That's -- I really appreciate the comprehensive answer. Thanks so much.

[Operator]

Our next question comes from the line of Meyer Shields with KBW. You may proceed with your question.

[Meyer Shields, Analyst at KBW]

Thanks. Study aside, I guess, the Symantec game right now. I don't mean you, I mean, politically. We've gone through two quarters of contracting real GDP growth. Can you talk about how that impacted your first half results relative to expectations?

[Greg Case, Chief Executive Officer at AON]

Go ahead, Christa.

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

Yes. So look, I would start with, we've seen really strong revenue growth, 8% in Q1, 8% in Q2, 8% year-to-date. And we continue to reiterate guidance for the full year exactly as we did at the beginning of the year, mid-single digital, greater organic revenue growth, margin expand for the full year and double-digit free cash flow growth. So we're seeing opportunities, Meyer, whether it's installation, which positively impacts our revenue in driving up asset values, driving up employment levels, driving up corporate revenues; whether it's interest rates, which obviously positively impact, both on the revenue side in terms of fiduciary investment income; or whether it's volatility and clients needing us more on the supply chain, workforce resilience, pension derisking in times of increased volatility.

But Greg, what would you say?

[Greg Case, Chief Executive Officer at AON]

I think you captured it well. Meyer, just trying to reinforce in every way we can, mid- to single digit or greater in terms of some of the performance for the year and ongoing for lots of different ways and perspectives that we've been able to accomplish that. And you've just seen it. You've seen the performance. You've see by the way, when we think about growth, it's not just top line growth, it's also operating income growth and free cash flow growth, as Christa described as well.

[Meyer Shields, Analyst at KBW]

Okay. No, that's helpful. Second, maybe more detailed question because we've been talking a little bit about CoverWallet. I was hoping you can just update us on how consumer or, I should say, customer willingness to use technologies like CoverWallet, how is that evolving over time?

[Greg Case, Chief Executive Officer at AON]

Excellent. Eric, why don't you take that one?

[Eric Andersen, President at AON]

Sure, Greg, I will. It's a great question and something we're really excited about as a platform. And there's two ways you use it. You use a direct-to-consumer, which continues to be sort of the base of what CoverWallet was when we acquired it, and that continues to grow. But where we're actually seeing great opportunity is how we bring CoverWallet to our existing clients that have large distribution issues on their own, whether it's rideshare companies or dealerships or what have you, where they need to provide product to a broad number of people, think of it from a B2B2C perspective versus a direct-to-consumer.

And so when you look at our enterprise client strategy and our ability to get to those large clients with this capability, as they're trying to provide value either to their own colleagues or to their business partners, it does give us a platform that we think drives great growth for us and rounds out the relationships that we have with these clients in a way we're providing real value. So we bought it as a D2C, and we've been able to expand it into the B2B2C arena and are having some good success with it.

[Greg Case, Chief Executive Officer at AON]

And when you think about it, Meyer, this is really about -- not in really introducing technology. You're sitting across the label from a client. Again, as I've got, as Eric described, [Indecipherable] around the world and essentially saying, "Hey, we think we can actually help you provide service to them with a really clean, tight interface that does things that help them manage their business on your behalf." We can do it globally. That's just not something that anyone can say. The behind-the-scenes technology is massive.

Now behind sees technology and IP, intellectual property is also massive, but you're not having that conversation. The conversation is our colleagues, essentially asking someone who's got a growth business, hey, would you like to actually raise growth capital in a way that doesn't dilute your equity ownership. And so the technology, the content is all behind that and reinforces that. And so the introduction of technology to the clients is really through helping them win in their business. And that's where we found great receptivity.

[Meyer Shields, Analyst at KBW]

Okay, that's very helpful. Thank you so much.

[Operator]

Our next question comes from the line of Rob Cox with Goldman Sachs. You may proceed with your question.

[Rob Cox, Analyst at The Goldman Sachs Group]

Hey, thanks for taking my question. I was hoping to get a little more color on what's driving the strong growth in Health Solutions broadly, and if you could quantify how meaningful the benefit from the timing of revenues was in the core health and benefits brokerage business in the quarter?

[Greg Case, Chief Executive Officer at AON]

Excellent. I love this question, Rob. And we love this category, as we talked about before, so much going on around the global world with Health. And it really does cut across regions beyond just a specific area. But Eric, thoughts on the progression in health.

[Eric Andersen, President at AON]

Sure. I mean, I think when you look at the long-term outlook, certainly helping the clients mitigate health care costs and improving employee health and well-being is a great business at the moment, and I think we're really confident in it. The growth has come from all geographies. And it's driven by retention, renewals, project work across the broad segment of that area, but also great growth related to the well-being and employee resilience part of health; the human capital piece with the Data Solutions growth, the advisory work really broad-based in terms of its impact we're having with clients across all of our geographies.

[Rob Cox, Analyst at The Goldman Sachs Group]

Got it. And then on the timing benefit on revenues in the quarter, is there any way to quantify that?

[Christa Davies, Chief Financial Officer and Executive Vice President of Global Finance at AON]

Yes. So what I would say is, we haven't disclosed it, but what we have said is, it's come from Q3 into Q2. So it's not material world, but you should see some small amount in Q3 than you would otherwise expect.

[Rob Cox, Analyst at The Goldman Sachs Group]

Okay. Got it. And then just lastly, I was just hoping to ask a question on Aon's ability to negotiate tire pricing and some of the fee-based businesses in light of inflation. And if you've seen any greater success in doing so in certain fee-based businesses versus others.

[Greg Case, Chief Executive Officer at AON]

Well, the conversation we have with our clients always is about value, the value we provide for them, how we build teams that support them and create. And then having to establish that, they have to understand the value, I appreciate the value. And then we talk about what's fair in the context of sort of how we are compensated for that. So that's been something we always do. Ours is about higher value. We want to bring more incremental value to clients than anyone else in more over time. And in doing so, we have been rewarded for that as it relates to value for clients. And so we continue to do that. And we're having the progression this year, just like we had last year and the years before.

[Rob Cox, Analyst at The Goldman Sachs Group]

Thank you.

[Operator]

Our last question comes from the line of Weston Bloomer with UBS. You may proceed with your question.

[Weston Bloomer, Analyst at UBS Group]

Hi, good morning. One follow-up question on organic growth within reinsurance. You highlighted strong growth in both treaty and facultative in the quarter. Swift, the facultative piece, understanding it's more transactional in nature and second half weight. Just curious on your outlook for facultative placements in the second half of the year. Any tailwinds worth pointing out? Or is facultative growing faster or slower than 3D currently?

[Greg Case, Chief Executive Officer at AON]

Facultative has been a great business for us over many years. And if you put it in the context of the overall market, where many of the insurers continue to remediate their portfolios, and they often do that through the use of facultative placements in order to maintain their direct client relationship. So fact for us around the world continues to be a great business, and we had created value with it and expect that, that would continue as we go forward.

[Weston Bloomer, Analyst at UBS Group]

Great. Thank you.

[Operator]

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Greg Case for closing remarks.

[Greg Case, Chief Executive Officer at AON]

Thanks very much and just wanted to say to everybody, I appreciate you being part of the call and look forward to our discussion next quarter.

[Operator]

[Operator Closing Remarks]