Greg Case - President and CEO Christa Davies - CFO.

Sarah DeWitt - J.P. Morgan Dave Styblo - Jefferies Adam Klauber - William Blair Mike Phillips - Morgan Stanley Paul Newsome - Sandler O’Neill Arash Soleimani - KBW Elyse Greenspan - Wells Fargo.

Good morning and thank you for holding. Welcome to Aon plc’s Third Quarter 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 third quarter 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..

Thanks very much and good morning everyone. Welcome to our third quarter 2017 conference call. Joining me here today is our CFO, Christa Davies.

Before beginning the discussion on our Q3 and year-to-date results, I would like to pause for a moment to reflect on the recent catastrophic events that have impacted various communities and millions of individuals around the world.

Our sincere condolences go out to families who are enduring this trauma, to business owners forced to rebuild, and to those remain at risk or without sufficient resources. We are very fortunate that our 3,000 colleagues and their families across 30 Aon offices directly affected by the series of events were safe.

During times of tragedy and devastation, it is heartening to see my colleagues from across the firm rise up and unite to help their neighbors, fellow collogues and clients.

Aon is also a partner of Red Cross investing in their disaster relief efforts to respond in times of need and offering volunteer work on the ground to aid the millions of individuals personally affected. I can’t begin to express enough gratitude to my Aon collogues and partners who put forth tremendous effort during the time of such human need.

With all hands on deck, we are fully focused on supporting our clients and our colleagues through the continued aftermath of these events. Now, referencing back to the specific topic of this call, we’d like to highlight that there are slides available on our website for you to follow along with our commentary today.

As we discussed on prior calls, Aon’s current position is a result of a proven decade-long strategy that focuses on aligning our portfolio solutions around our clients’ highest priorities in the arenas of risk, retirement and health. We’ve taken significant steps to get here.

Earlier this year, we completed the divestiture of our outsourcing platform, which provides a further catalyst for our strategy and actions to deliver substantial shareholder value.

With approximately $3 billion of additional capital to accelerate investment in emerging client needs and in our Aon United operating model, we expect to substantially strengthen our firm even further. We’re already seeing improvement in our growth profile driven by investments in high-growth, high-margin areas across our portfolio.

For example, our organic growth has accelerated year-to-date from 2% in 2015 to 3% in both 2016 and now 2017.

And we’re taking further steps to unit Aon with investments to progress toward a single global business services operating model, increasing Aon’s efficiency and connectivity, and through one global P&L encompassing all of Aon’s industry-leading capabilities, helping us deliver all of global Aon to their clients in their local markets.

Now turning to the quarter on page five of the presentation. Consistent with previous quarters, I would like to cover two areas before turning the call over to Christa for further financial review.

First is our performance against key metrics we communicate to shareholders; second, overall growth performance including continued areas of strategic investment. On the first topic, our performance versus key metrics.

Each quarter, we measure our performance against the key metrics we focus on achieving over the course of the year, grow organically, expand margins, increase earnings per share and deliver free cash flow growth. In the third quarter, organic revenue growth was 2%, highlighted by strong growth in Reinsurance and Retirement Solutions.

Operating margin increased by 170 basis points, primarily reflecting savings from investments in our Aon United operating model and core operational improvement. EPS increased 18% to $1.29, reflecting both strong operating performance and effective capital management.

Finally, free cash flow decreased $881 million year-to-date, primarily reflecting tax payments related to the divestiture. Overall, Q3 was a quarter of continued progress with year-to-date results reflecting 3% organic revenue growth, 170 basis points of margin improvement and 17% EPS growth heading into our seasonally strongest quarter of the year.

Turning to slide seven, on the second topic of organic growth and strategic investments. Organic revenue growth was 2% overall in the third quarter. And as I mentioned earlier, on a year-to-date basis, organic revenue growth was 3%, reflecting growth across all five revenue lines with particular strength in Health and Reinsurance Solutions.

Reflecting now on each of our core growth platforms. In Commercial Risk Solutions, organic revenue declined 1% against the strong comparable of 4% growth in the prior year quarter. The prior year quarter included a benefit from certain onetime items.

On average, globally, exposures are modestly positive and the impact from pricing was modestly negative, resulting in a relatively stable market impact overall. Our results in the quarter reflect modest growth internationally across EMEA, Asia and the Pacific, driven by strong new business generation and management of our renewable portfolio.

In the U.S., results faced headwind from the timing of certain items. Given recent catastrophic events and significant industry challenges, our global teams prioritize helping clients with immediate action plans, claims processing and recovery efforts in the quarter.

Overall, we believe our results in Commercial Risk Solutions for the third quarter reflect the confluence of unfavorable timing and events in our seasonally smallest quarter, against the strong comparable in the prior year.

We believe the underlying results are better viewed on a year-to-date basis and we would expect the fourth quarter to show growth in our seasonally strongest quarter. In Reinsurance Solutions, organic revenue growth was 7%, an acceleration from flat in the prior-year quarter.

I would note, this is the second consecutive quarter of the highest level of organic revenue growth achieved in our reinsurance business in five years. Results reflect growth across every major area including treaty placements, capital markets transactions and facultative placements.

We saw a particular strength in treaty placements, driven by record new business generation including several new clients to Aon and a modest benefit from reinstatement premiums following the recent events. Results were partially offset by modest, unfavorable market impact, primarily in the Americas.

In Retirement Solutions, organic revenue growth was 5%, an acceleration from 4% in the prior year quarter.

We saw a continued strong growth in investment consulting, including double-digit growth in delegated investment management solutions, reflecting an increase in client demand for Aon’s tailored solutions, independent [ph] advice, as well as increase in performance fees for outperforming benchmark returns.

Assets under management and delegated investment management continue to trend upward, reaching a $118 billion in the third quarter. We also saw a solid growth in our talent practice, primarily from compensation survey and benchmarking services. In Health Solutions, organic revenue growth was 2%.

We saw strong growth in health and benefits brokerage including double-digit new business generation with particular strength in the U.S. and Latin America. Results were partially offset by a decline in project-related work in the healthcare exchange business.

On a year-to-date basis, organic revenue growth was 7%, an acceleration from 4% in the prior year. In Data & Analytic Services, organic revenue growth was 3%. Results primarily reflect growth in our Affinity business, with particular strength in the U.S. Growth in U.S.

Affinity was highlighted by continued strong performance in pet and financial solutions as well as the modest increase in claims processing in our employed business following the recent activity. Now, turning to slide eight to discuss areas of strategic investment.

Clients are navigating an increasingly volatile world where economic, demographic and geopolitical forces combined with the exponential pace of technology change are all converging to create a challenging new reality for businesses.

Aon has a strong track record of allocating capital for developing innovative, first-to-market solutions to help solve problems and create differentiated value in response to specific client needs.

We’re investing organically and through M&A across our portfolio in areas such as Data & Analytics, in our InPoint and Re/View businesses; cyber risk advisory through the recent acquisition of Stroz Friedberg; Affinity, in multiple areas across the business; health and elective benefits brokerage through the recent acquisitions of Admix in Latin America and Univers; healthcare exchanges, where we offer the broadest set of solutions in health; geographically with the pending acquisition of UMG, reinforcing our industry-leading position in the Netherlands; and finally, in delegated investment management solutions, a business with rapidly growing client demand.

In the third quarter, we announced the pending acquisition of the Townsend Group, a leading global provider of investment management and advisory services, primarily focused on real estate.

Townsend significantly expands our investment capabilities by bringing greater depth of expertise in real estate and real estate assets to Aon’s distribution scale and furthers our ability to provide more attractive, alternative, pilot market asset capabilities to our clients.

Overall, our strategic investments in high growth areas and in Data & Analytics are improving the firm’s long-term growth profile, driven by new business generation, strong retention rates, and increased operating leverage across the portfolio.

In summary, during the quarter, where client and colleague needs were our immediate priority, we delivered strong operational improvement and double-digit earnings growth, reflecting increased operating leverage and performance on new initiatives, in addition to the year-to-date return of approximately $2.1 billion of capital to shareholders through share repurchase and dividends.

Looking forward, we expect a strong finish to the year with continued momentum amplified by an unmatched level of investment driving the next wave of innovation for clients and substantial value creation for our shareholders. I’m now pleased to turn the call over to Christa for further financial review.

Christa?.

Thank you so much, Greg, and good morning, everyone. As Greg noted, our performance marks a solid quarter of progress highlighted by strong operational improvement and effective capital management while continuing to take significant steps to increase the effectiveness and efficiency of our operating model.

Our results year-to-date reflect growth across every major revenue line, strong operational improvement, and double-digit earnings growth heading into our seasonally strongest quarter of the year. Turning to slide 10 of the presentation.

Our core EPS from continuing operations, excluding certain items, increased 18% to $1.29 per share for the third quarter compared to $1.09 in the prior-year quarter.

Certain items that were adjusted for in the core EPS performance and highlighted in the schedules on Page 11 and 12 of the press release include non-cash intangible asset amortization, restructuring charges, charges related to certain regulatory and compliance matters, non-cash expenses related to pension settlements in the prior-year quarter, and the related tax impact.

Included in the results was a $0.01 per share favorable impact from foreign currency translation due primarily to a stronger U.S. dollar versus the pound and a modestly weaker U.S. dollar overall. Turning to the next slide to discuss our strong operational performance.

Operating income increased 16% and operating margin improved 170 basis points to 20.3%, compared to the prior year quarter. Operating margin improvement primarily reflects $55 million or 240 basis points of savings from restructuring initiatives and other operational improvements before any reinvestment.

This was partially offset by $10 million or minus 40 basis points of transaction costs related to recent acquisitions, and $5 million or minus 20 basis points headwind, resulting from lower non-cash pension income. Year-to-date operating income has increased 14% and operating margin has improved 170 basis points compared to the prior year.

From a dollar standpoint, operating income has increased $183 million with $109 million driven by savings before reinvestment and $74 million delivered by solid organic revenue growth and core operational improvements, strong progress operationally as we continue to execute against our multiyear investment in the firm. Turning to page 12.

I’d like to spend a few moments discussing the investments we’re making to create our next generation global business services model that allows for better scalability, flexibility and enhanced colleague and client experience. These investments are intended to create one operating model with increased operating leverage.

Our primary investment areas are across IT, real estate and people. In IT, we expect to create greater insight from data center optimization, application management and strategic vendor consolidation. In real estate, we expect to drive greater collaboration and engagement through real estate portfolio optimization.

And in people, we expect to create greater scalability of operations and activity, including the use of centers of excellence and third-party providers. As part of these operating model investments, we plan to invest an estimated $900 million in total cash out of the $3 billion total outsourcing divestiture proceeds.

These investments include an estimated $700 million of cash charges expected to be incurred $350 million in 2017; $250 million in 2018, and $100 million in 2019. And an estimated $200 million of incremental CapEx, expected to be incurred $30 million in 2017; $100 million in 2018; and $70 million in 2019.

There is an additional estimated $50 million of non-cash charges included as part of asset impairments and lease consolidations. Overall, we expect these investments and other expense discipline initiatives to deliver $400 million of estimated annual savings in 2019, before any potential reinvestments.

Following this $900 million investment in our operating model, we are left with approximately $2.1 billion of incremental capital from the outsourcing divestiture proceeds to invest in high-growth, high-margin areas across our portfolio and to return to shareholders. We will deploy this capital to the highest return on invested capital opportunity.

As Greg mentioned earlier, we’ve returned approximately $2.1 billion to shareholders year-to-date through share repurchase and dividends. We also announced two significant acquisitions during the quarter, the Townsend Group in our delegated investment management business, and UMG in the Netherlands, which are expected to close in the coming months.

With the completion of these two acquisitions and year-to-date activity, we’ve committed over $1 billion of capital to M&A in 2017 in high-growth, high-margin business. Turning to the next page. In the third quarter, we incurred $102 million of restructuring-related charges, relating primarily to workforce reduction, IT and other general initiatives.

Year-to-date, we’ve incurred $401 million of restructuring-related charges, representing 53% of the total program estimate. The cash impact year-to-date is an outflow of $199 million.

We recognized $55 million of savings in the third quarter, and $109 million of savings year-to-date, representing 73% of the expected savings for the year and 27% of the expected total savings. Now, let me discuss a few of the line items outside of operations on slide 14.

Interest income increased $9 million to $10 million for Q3 compared to the prior year quarter, reflecting additional income earned on the balance of proceeds from the sale of the outsourcing assets.

I would note that higher cash balances in the short-term resulting in additional interest income but balances are coming down through the deployment of capital to depending M&A and share repurchase such that we would not expect the same level of interest income going forward. Interest expense was similar at $70 million for Q3.

Other expense of $5 million includes $15 million of net losses due to the unfavorable impact of exchange rates on the re-measurement of assets and liabilities in non-functional currencies, partially offset by $10 million of gains primarily related to certain long-term investments. Turning to taxes.

The adjusted effective tax rate on net income from continuing operations, excluding the applicable tax impact associated with certain non-GAAP adjustments, increased to 17.5% compared to 14.2% in the prior year quarter. The adjusted effective tax rate in the prior year reflects a net favorable impact from certain discrete items.

Lastly, weighted average diluted shares outstanding decreased 5% to 257.3 million in the third quarter compared to 269.6 million in the prior-year quarter, as we effectively allocate capital. The Company repurchased 5.4 million Class A Ordinary Shares for approximately $750 million in third quarter.

The Company has approximately $5.9 billion of remaining authorization under its share repurchase program. Actual shares outstanding on September 31st were 250.8 million and there were approximately 5 million additional dilutive equivalents.

Estimated Q4 2017 beginning dilutive share count is approximately 256 million, subject to share price movement, share issuance and share repurchase. Now, let me turn to the next slide to discuss our solid balance sheet and financial flexibility.

At September 30, 2017, cash and short-term investments decreased to $2.4 billion, which continues to reflect higher balances related to the proceeds from the sale of the outsourcing assets. Total debt outstanding was similar at $6 billion. And total debt to EBITDA on a GAAP basis to continuing operations increased modestly to 3.3 times.

As discussed previously, while debt to EBITDA will initially be elevated as a result of the sale of the outsourcing assets, we expect to return back to the 2 to 2.5 times range by the end of 2018, driven by operational improvement.

Cash flow from operations for the first nine months decreased $863 million to $289 million, primarily driven by cash tax payments associated with the divestiture, a $199 million of cash restructuring charges and $45 million of transaction costs related to the divestiture, partially offset by operational improvement.

Free cash flow, defined by cash flow from operations less CapEx, decreased $881 million to $164 million, driven by a decline in cash flow from operations and an $18 million increase in CapEx, including investments to deliver our Aon United operating model. Turning to the next slide to discuss our free cash flow growth over the long term.

We value the firm based on free cash flow and allocate capital to maximize free cash flow returns. We’ve made substantial progress since introducing free cash flow as a key financial metric in 2012, reaching record free cash flow of $2.1 billion in 2016.

Our disciplined capital management approach is focused on maximizing return on invested capital, which we’ve consistently improved each year since 2010, increasing 540 basis points to 17.1% in 2016. We expect the recent sale of our outsourcing assets and investments in our Aon United operating model to improve this even further in 2017 and beyond.

We have taken significant steps to maximize the translation of each dollar of revenue into the highest amount of free cash flow, including working capital initiatives and actions to manage our cash pension contributions. Since 2010, we’ve increased our free cash flow margin by nearly 1,000 basis points to 18.1% in 2016.

Looking forward, there are three primary areas that we expect to continue to contribute to incremental free cash flow generation. The first is continued operational improvement, driven by expected accelerated organic revenue growth and margin expansion.

The second is working capital improvements, as we focus on closing the gap between receivables and payables. We expect working capital to contribute to free cash flow by over $500 million over the long-term. And third is expected lower cash tax payments, reflecting a lower effective tax rate over time. In summary, this was a solid quarter of progress.

We delivered strong operational improvement and double-digit earnings growth while continuing to take substantial steps to strengthen our firm over the long term, including investments in high growth areas and in our Aon United operating model.

We believe that operational improvement combined with significant financial flexibility from transaction proceeds and underlying free cash flow generation position the firm to deliver on our near-term goal of exceeding $7.97 in adjusted EPS in 2018.

More importantly, we believe this reinforces our ability to deliver double-digit annual growth in free cash flow over the long-term, reflecting what we believe is the next significant value-creation opportunity for shareholders. With that I’d like to turn the call back over to the operator for questions..

[Operator Instructions] Our first question comes from Sarah DeWitt from J.P. Morgan. Ma’am your line is open..

Hi. Good morning. First, I was wondering if you could just talk about on organic growth, what drove the decline in Commercial Risk Solutions. I think, you mentioned some timing issues.

And do you expect that to rebound going forward? And then second, could you just talk about your outlook for PNC insurance pricing, post the active third quarter hurricane season?.

Sure, happy to do that, Sarah. As we described, first of all, remember, this is our -- Q3 is our smallest quarter sort of over the course of the year heading into our strongest quarter, the fourth quarter. I talked about it, strong comparable from the Q3 last year of 4%, and essentially said, the timing was really showing up in Q1 and Q3.

So, we don’t expect anything coming back in Q4. But, what we really try to highlight is kind of -- if you look at our results, not just in commercial risk but really overall and kind of the year-to-date perspective, this is really where we think sort of as a best assessment overall in terms of where we are, and this we essentially said.

If we think year-to-date Q3 ‘15, ‘16, ‘17, we have gone from 2% in ‘15 to 3% in ‘16, 3% in ‘17, and we believe we can continue to accelerate that over time. We see Q3 as a little of a anomaly in the context of all that..

Pricing….

Pricing piece, I thought you might forget that. [Multiple speakers] Listen, on the pricing side, obviously a lot’s been written and talked about. Our view is -- look, there is just a -- continues to be a tremendous amount of uncertainty out there.

The ultimate losses, unclear kind of where they all shake out from time to time, just look at the ranges sort of been published, they’ve been astronomical in terms of sort of how they’ve come in. I would say, from our standpoint, look, we still sit in a very well capitalized industry overall.

We described while substantial, more of an earnings event versus a balance sheet event in terms of sort of where we’re over time. But I would highlight from Aon’s perspective, we see this very much on a client by client basis.

We’ve invested in substantial data and analytics over time to put us in what we believe is a great position to help our clients, particularly in these kinds of environments. If you look at what we do with Aon Client Treaty for example, these are the types of investments that, frankly, reduce risk work for clients and create opportunity for them.

From our standpoint, it’s going to play out over time. Sarah, there is no specific answer at this point. And we’re going to take it client by client as it evolves over time..

And your next question comes from Dave Styblo with Jefferies. Your line is open. .

I just want to go back to operating income. So, if we take the 476 and back out the unfavorable adjustments from pension and M&A transaction costs, and adjust for the $55 million of cost savings, I guess, I get a margin around 18.6% on underlying basis, which should be flat year-over-year.

Is that sort of a right way to think about it, or did you guys plough back some of the $55 million of cost savings? And obviously, if you did that, the core margin would show some expansion. So, I’m just trying to understand what’s happening on a fundamental basis, when we exclude some of the larger puts and takes there..

I think about this on a year-to-date basis because I think quarter-to-quarter, it’s a little lumpy Dave. And frankly, Q3 is our seasonally smallest quarter. And so, if you look at it year-to-date, you can see that OI is up 14% or $183 million.

If you look at that $183 million, $109 million of it came from restructuring and $74 million of it came from core operational improvement. So, you’ve basically got 60% of the growth in OI from restructuring savings before reinvestment and 40% of it from core organic revenue growth and margin expansion.

So, we feel really good about the operating income growth for the year, and margins for the year are up 170 basis points. So, we’re very pleased with the progress so far..

I might add to that, Dave. If you look at it -- Christa just highlighted really Q3 year-to-date results, Q3 2017, if you did the exact same question in Q2, we’re better against each one of those metrics, as you go from Q2 to Q3.

So, it’s plus 14, as Christa described and year-to-date Q3, the year-to-date Q2 was up 12%, we’re up a 170 basis points year-to-date Q3, that was a 160 basis points year-to-date Q2, up 17% EPS that same number was 15% in Q2. So, it’s actually a nice progression. And as we described it, don’t overplay, but a quarter of progress in terms of where we’re.

And what you’re seeing is really core performance and operating leverage increasing as we continue to invest in the global business services platform..

Okay, got it. And then, on your $150 million of cost savings target, it sounds that’s unchanged for the year. But, if you look at how things are trending, if you just kept the same run rate from 3Q into 4Q, you’re going to be above that range. And I guess, I would assume that as you progress, your cost savings should actually increase.

So, are you guys in position where you might actually be trending above your cost savings target for this year or is there something that makes that come down in the fourth quarter?.

Dave, we are exactly on track with the program estimates and we feel really good about the progress so far..

So, it sounds like -- I mean, is there a reason why we come down? It sounds like you are holding to the $150 million..

We are holding $150 million and we will update at year-end..

Thank you. Our next question comes from Adam Klauber from William Blair. Sir, your line is open..

It looks like you’ve got roughly $2.4 billion or so of cash and short-term securities on the balance sheet. And historically, you hold more like $700 million to $900 million. So, that would suggest you have roughly $1.5 billion extra cash and then for next year, on top of that you have what you generate.

Is that the way to think about what you have to deploy for 2018 versus 2017?.

Yes. I think that’s right, Adam. And I guess, what I would say is, as you look at sort of the $2.4 billion, $850 million of it is committed to the M&A we did in the quarter. We did publicly announce those two deals, Townsend and UMG. So, you have $1.6 billion left plus Q4 free cash flow going into 2018..

I think you mentioned that tax payments reduced free cash this quarter.

How much were those?.

Yes. We haven’t given that number. But, what we can say is that the after tax proceeds from the sale of the outsourcing assets were approximately $3 billion..

Okay. And then, you’ve done a couple of good sized deals already in growth areas.

Does that mean you have to digest those or do you still have a good pipeline, and is it possible to see some more good deals in 2018?.

From our standpoint, listen, we’ve actually done, 19 acquisitions signed closed year-to-date and as Christa described, over a $1 billion committed on the M&A front. We see, again, real opportunities here to add content capability to the overall portfolio.

As you’ve heard us say multiple times, so I’ll repeat it here again today, we take a very, very disciplined approach to this. Christa has put in place a return on invested capital framework, cash on cash return; nothing gets through that framework. And in essence, the benchmark is buyback, which we believe is a very, very attractive investment.

But, when we find opportunities that exceed buyback, we invest in those. And there is a very substantial robust pipeline, lots of opportunities out there and we see these as kind of add-on acquisitions to the Aon family that content capability that we can scale.

Townsend is a terrific example of that and UMG’s [ph] a terrific example of that, Admix in Latin America is a terrific example of that. So, lots of different opportunities for us out there and you’ll continue to see us invest along the framework I described..

And finally on Townsend, will that deal be flowing in the fourth quarter? And are the margins at this business generally in line, better or not as good as the overall business..

We do expect to close both Townsend and UMG in the coming months. We won’t be more specific about timing than that. And they are very attractive businesses. They are high growth, they are high margin and they are high free cash flow generation. And that’s really -- that fits with the overall story of how we are evolving the portfolio.

We’re exiting lower growth, lower margin, lower free cash flow generation businesses, and we’re disproportionately investing. And that’s what you have seen in the over $1 billion of M&A that we have committed year-to-date and we are very excited about that..

And we really like, Adam, is -- not only do we like the financial characteristics but what drives that is really the underlying client capability and content characteristics. And each of those bring a unique capability to the table on our behalf and we are going to -- we can then see that across the firm.

And this is back to the idea of the catalyst, which is really the -- if we saw the outsourcing business, it generates another level of investment we can put back into the business, both on the acquisition side as well as investing in global business services across Aon to strengthen the firm.

So, it really is we think unique opportunity over the coming two to three years, when we think about capital deployment..

Our next question comes from Kai Pan from Morgan Stanley. Sir, your line is open..

It’s actually Mike Phillips here in place of Kai Pan this morning. Couple of questions, one on margins. In the quarter, the 120 basis-point improvement, decent improvement. I guess, with lots of moving parts behind that, one is FX.

How much of the FX impact to the margin improvement?.

So, there is no FX impact on margin for the quarter..

And then, same thing on margin with the organic growth being what it was, 2%.

Does that mean that you can expand the margin, if organic grows even more?.

Yes, we can. And so, what you are seeing, due to the investments we have made in higher growth, higher margin areas over the last few years, our investments in Aon United operating model is we can grow margin at low rates of growth. And so, as Greg said, we do expect to accelerate growth based on the investments we have made.

And that’s where you should expect accelerating margin expansion..

Lots of brokers are talking about the excitement they have with maybe possible pricing changes and how they can take advantage of that, and you guys are closing the difference.

I guess, can you talk about any possible risk to you guys because of the restructuring you’re doing, and possible maybe disruptions to brokers and maybe not to focus on the possible opportunities coming with the possible price changes, is there any risk there?.

First of all, Mike, I would just step back. As I described when Sarah asked her question at the beginning, for us, a lot of uncertainty out there in terms of what’s going on. That means there is uncertainty for our clients and that is actually the wheelhouse of Aon.

The content capability, analytics we have invested in over time, it literally puts us in a tremendous position. Our clients understand risk, measure risk and mitigate risk. And that’s really what we are doing. I want to also emphasize, the investment we are making back into the firm is a substantial investment.

It involves restructuring but it is also investment in a number of areas to strengthen our firm, in technology, things we are doing on the real estate front to create greater client areas to bring our colleagues together. So, a lot is going on across Aon. But it is all fundamentally to make Aon stronger engine, a stronger firm to serve clients.

So, I’d go the exact opposite. What we are doing to strengthening our firm, support clients over time and this is another example of a very high stress time for clients, so we can be helpful to them. So, I see exactly the opposite. To us, this is an opportunity to invest to strengthen the firm. And that’s in fact exactly what we are doing..

It sounds like you are pretty confident that brokers won’t get distracted or whatever by the restructuring making -- and you don’t see any risk there?.

Quite the reverse. Again, I think our team is fully focused on clients 24x7 and that’s what Aon is all about, so don’t see any concern there at all..

Thank you. Our next question comes from Paul Newsome from Sandler O’Neill. Sir, your line is open..

I was wondering about where or not the goal to exceed 7.97 next year is dependent upon the current accounting system or the one that we’re going to get next year with the change in revenue recognition? And maybe just a view, an update whether or not you have a view how the revenue recognition might change your financials next year?.

So, really the impact of 2018 revenue recognition accounting changes is largely immaterial to full year revenue and margin; it’s really going to change the timing by quarter.

There will be a significant re-phasing of quarterly revenue within a given year, particularly within reinsurance solutions, but there will be immaterial changes to full year 2018.

The other thing I would note is at our Q4 full year 2017 earnings day, we will actually restate 2016 full year and 2017 full year by quarter to give you that detail for the benefit of shareholders..

Does it in any way change how we calculate organic growth as well?.

Because we’re going to restate 2016 and 2017, no..

Thank you. Our last question over to Arash Soleimani from KBW. Sir, your line is open. .

I just wanted to get your thoughts the protection gap in insurance and to what extent you think the events we saw in the third quarter could actually lead to a higher insurance penetration within certain lines of business?.

It’s a terrific question. And we’ve talked about that -- the industry has talked about that. These types of events highlight literally sort of individuals and companies that are quite literally uncovered in sort of events and times of trauma. I would say, at Aon, we think about it a little bit differently from a kind of a protection gap.

Because if you think about this from the side of a client or an individual customer, we’re essentially saying, we have a gap out there in order for you to actually be in a better position, just buy more of our product. We look at it differentially.

We look at it literally as, think about, how capital gets deployed, are there more efficient ways to deploy across the risk spectrum, and we believe there actually is. And there is different products and innovations that come with that.

And so, our view is, when you think about kind of the world of risk out there and you recognize sort of how little the penetration is around the world, there is just tremendous opportunities to actually strengthen and build upon that, not just the existing risk like flood which is an obvious one but the new risk like cyber.

I mean, again, if you think about cyber right now, there was $450 billion of loss in the U.S. last year, or reported loss in cyber and $2.5 billion or $3 billion in premium. The laws in Europe, which are going to come into effect in May, June of 2018 are going to create another wave of reported loss.

How we respond to that to support clients is really a function of how we innovate as an industry. It is also true for the more straightforward coverages like flood and which we got to respond with innovation that actually make that more attractive, different than the current product we’ve got right now.

So, we believe there is a very strong set of opportunities to increase the penetration, really serve clients more effectively as they understand, measure, and mitigate risk, but it’s going to require our industry to innovate in order to make that happen..

And just my one other question is since you mentioned cyber, and I know -- we heard a lot of industry estimates of cyber going from $3 billion up to $30 billion in just the matter of years.

So, based on what you’ve been seeing in your own books, do you see demand potentially increasing at that level or how do you think about the potential growth opportunity in the next few years?.

Again, we look at it -- we do see a substantial growth fully driven by client needs. So, I mean, again, if you think about literally just the $450 billion of reported loss from the U.S., virtually -- I’m saying U.S. because most of it was U.S. reported, that begs the question, is there just no cyber in Europe? Obviously, there is.

So, why is it so much smaller? It’s a function of the laws, those are going to change. Therefore, cyber is going to go a number which is some -- many multiples of that. So, we see tremendous opportunity to help clients understand and deal with cyber. And it’s been a source of growth for us, will continue to be a source of growth for us.

We’re privileged to be the largest place for this around the world and we’re doubling down our investment in it. Having said that, our industry including Aon, need to continue to innovate on behalf of clients on this category. So, we see this as a substantial opportunity because it’s a substantial source of risk for our clients..

Thank you. Our next question comes from the line of Elyse Greenspan from Wells Fargo. Ma’am your line is open..

I was hoping to spend -- get a little bit more color in terms of the reinsurance growth. I know, you mentioned that there wasn’t a lot of restatements there. It doesn’t -- was there any kind of one timers that you would point to? It’s obviously the second quarter of pretty strong growth in that business.

What’s the outlook there? And then, as we think about margin improvement you saw in the quarter, typically, I would think reinsurance run at better margins and then rest of your business, was that helpful to the level of margin improvement you saw this quarter?.

Why don’t I start on the revenue side and Christa you can pick up the margin piece? First of all, on the revenue side, much like we talked about sort of -- we don’t look at the quarter, we look at kind of year-to-date. We’re kind of 5% year-to-date. We think that’s actually great progress.

I would come back reflecting on multiple calls over the last few years and just highlight again, we just have a superb team on the reinsurance side, they are tremendously well-positioned to support clients. We’re agnostic on the overall approach, we’re essentially helping our clients again think about ways to understand and control volatility.

And what you saw this quarter, it really was record new business on the treaty side. And this is with existing clients but also with new clients to Aon as we gain market share in this arena. Also, we are number one in treaty, number one in facultative placements, and number one in insurance, like securities like et cetera.

So, we just got an exceptionally strong position. This team has also taken great efforts to expand the marketplace. If you think about what we’ve done on the mortgage side and literally created net new markets in an area that hadn’t existed before. So, what you see on the reinsurance front is just continued progress from an exceptional team.

And again, as I said clients that have lots of need out there to understand and deal with volatility, which is increasing over time. So, it’s just been terrific progress from a very, very strong team in this context.

In terms of impact on margin, Christa?.

Yes. So, Elyse, we would say that the margin growth year-to-date of a 170 basis points is really across the whole of Aon.

It’s driven by strong growth in each of the five new revenue lines we have margin expansion in each of those areas, and then, underpinned by the investments we are making in the Aon United operating model and the savings we are driving from that. So, it isn’t disproportionately driven by any particular area of the business..

And then, you guys are a few quarters into this savings plan. I know in the past, you have had several and you had a good track record for seeing saves that have more than exceeded how you initially laid out some of your prior plans.

So, a few quarters in, I guess, how are you seeing things as you’re going along with the program? And do you think there is a potential that we could see this be revised up down the road?.

Elyse, we would say we are exactly on track. As I said earlier in the call, we will certainly update at year-end. But, we would say, we are exactly on track with -- to deliver $150 million this year, $300 million next year and $400 million the year after. And we feel very good about the progress..

And then, in terms of buybacks, the free cash flow was obviously negative in the quarter. How do we think about buybacks here, given that you have these two acquisitions that you are going to close in the near term? And you have obviously come off two quarters of pretty high level of buyback following the divestiture..

Yes. I mean, what I would say, Elyse, is we have returned, as Greg said, over $2 billion to shareholders year-to-date between buyback and dividends. And we have done $2 billion of buyback roughly so far this year, and we have committed $1 billion to M&A so far this year. I think what you will see in Q4 is more M&A and more buybacks.

And it’s all driven by return on capital.

As you think about the amount we can deploy, whether it’s on buyback or an M&A, you have got $2.4 billion on the balance sheet with the M&A spend committed of 850, so you’re left with $1.6 billion cash on the balance sheet, plus Q4 free cash flow generation, which is our seasonally strongest quarter of the year.

And so, we are very excited about the opportunity to invest in organic opportunities, in M&A, and our highest return on capital opportunity across Aon remains share repurchase..

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

I just want to thank everybody for being part of the call today, and look forward to our conversation next quarter. Thanks very much..

Thank you, speakers. Participants, that concludes today’s conference call. Thank you all participating. You may now disconnect..