Good morning and thank you for holding. Welcome to Aon plc's First Quarter 2023 Conference Call. [Operator Instructions] I would like to also remind parties that this call is being recorded. If anyone has an objection, you may disconnect your line at this time. It is important to note that some of the comments in today's call may constitute certain statements that are forward-looking in nature as defined by the Private Securities Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historic results or those anticipated. Information concerning risk factors that could cause such differences are described in the press release covering our first quarter 2023 results as well as having been posted on our website. Now, it’s my pleasure to turn the call over to Greg Case, CEO of Aon plc.

Thanks very much and good morning, everyone. Welcome to our first quarter conference call. I'm joined by Christa Davies, our CFO; and Eric Andersen, our President. As in previous quarters, for your reference, we posted a detailed financial presentation on our website. Before we begin, as always, we want to thank our colleagues for the great work they're doing every day around the world, to help our clients and each other. We continue to live in a world where volatility, complexity and uncertainty are increasing. And in this environment, our clients are being asked to make decisions faster than ever. And as a result, we see strong and ongoing demand for our advice and solutions, as many of our clients realize that remaining in defensive or reactive mode is not sufficient. And in fact, a pivot to offense is ultimately necessary to win and achieve their objectives. Clients are telling us, there are two primary areas where they're urgently looking for a competitive advantage, risks and people. Addressing these challenges requires that we bring this out from across our firm, to enable our clients to make better decisions, which is the core Aon United. Given these ongoing demands our strategy positions Aon as uniquely capable, of helping clients go on offense and make better decisions that mitigate risk to their business and maximize the impact and engagement of their people. Take ESG or Environmental Social and Governance as an example. These are major interconnected categories that cut across traditional silos. Our clients need a broad strategic view to understand and assess all the risks around ESG. And any targeted solutions and capabilities to solve for these risks. Our recently published ESG impact report describes our work helping clients address these issues as well as the impact across our firm. And…

Thanks so much, Greg. And good morning, everyone. As Greg highlighted, we just have a strong operational performance in the first quarter highlighted by 7% organic revenue growth that translated into 70 basis points of adjusted margin expansion. This is a strong start to the year and we're very well positioned to continue driving results in 2023 and over the long term. As I reflect on the quarter, as Greg noted, organic revenue growth was 7%, driven both by ongoing strong retention and net new business generation. We continue to expect mid-single digit or greater organic revenue growth for the full year 2023 and over the long term. I would also note that reported revenue growth of 5% includes an unfavourable impact from changes in FX of 3%, driven by primarily by a weaker Euro versus the U.S. dollar, as Q1 is our seasonally largest quarter for Euro denominated revenues. I'd also highlight fiduciary investment income, which is not included in our organic revenue growth was $52 million, or 1.4%. Moving to operating performance, we delivered strong operational improvement with adjusted operating margins of 38.7%, an increase of 70 basis points driven by organic revenue growth and efficiencies from Aon Business Services. Overcoming expense growth, including some investments in colleagues and technology to drive long-term growth, and some ongoing resumption of T&E, especially compared to the prior period when business travel was still suppressed by COVID-19. Looking forward, we expect to deliver margin expansion in 2023 and over the long term as we continue our track record of cost discipline, and managing investments in long-term growth on an ROIC basis. As we've previously communicated, we think about margins over the course for the full year, driven by three areas. The first is top line revenue growth. The second is portfolio…

[Operator Instructions] Our first question comes from the line of Jimmy Bhullar with JPMorgan. Please proceed with your question.

Hey, good morning. So first, I just had a question on your expectations for the tax rate for 2023. It was high. I think it was around 19.5% in the first quarter. That's higher than the 17% to 18% range you've had the last few years. But what drove that? And what are your expectations for the tax rate for this year?

Thanks so much for the question, Jimmy. As you know, we don't give guidance on the tax rate going forward. But if I look back historically, exclusive of the impact of discrete items, which can be positive or negative in any quarter, our historical underlying rate has been 18% for the last five years.

And then the changes in Singapore and a few other places, should those have a material impact? Or is there any reason to expect the rate to be different this year than in the past?

Jimmy, we feel really confident about our overall capital structure for the company. We're domiciled in Ireland, we run a global capital pool, and we run a global cash pulling structure, and that gives us enormous flexibility as we think about any future legislation.

Okay. And then just lastly, on fiduciary investment income, assuming rates stay where they are, is there further ramp-up in that, that you'd expect as like your portfolio sort of resets to where rates have gone? Or has the full impact of the rise in rates over the past several quarters, is it already reflected in your numbers?

Yes. So what we would say is, as we roll through, we really saw the pickup in fiduciary investment income in Q3 last year. So you'll see the upside in Q2 and then less as we move through the rest of the year. I would note, as you think about our overall fiduciary balances, we have, on average, $6.5 billion of fiduciary investment -- of fiduciary assets. And every 100 basis point increase in the short end of the interest rate curve is $65 million, top line and bottom line. You should think about those fiduciary assets, Jimmy, as split roughly 50-50 between the U.S. and international.

Okay. Thank you.

Our next question comes from the line of Andrew Kligerman with Credit Suisse. Please proceed with your question.

Hey, good morning. You mentioned in the release that the U.S. grew modestly in terms of organic revenue growth in Commercial Risk Solutions. And transaction in M&A was probably with a very tough comp. So it looks like as we get into the second quarter and the rest of the year, that's really not a tough comp anymore. Could you give any sense of what that impact was in the quarter? And should we expect going into the next three quarters that we could see a significant contribution to organic growth?

So first of all, Andrew, thanks very much for the question. We appreciate it. We would observe, by the way, across the board, as you think about sort of growth for the quarter, it's been a strong quarter for us, 6% organic across all the solution lines. I think it may be the first time we've accomplished that in a long time, and it's really been terrific. On the U.S. side, it's an exceptionally strong business. You highlighted a great very, very strong comp last year and then just very, very strong capability in the specialty areas that a few of which have been under pressure. But we continue to invest in them because we know they're going to be terrific long term. So for us, listen, continued momentum across the board. And as the market shifts a bit on the M&A and transaction side, we're going to obviously benefit from that. Eric, anything else you'd add?

No, Greg, I think you covered it well. I think it's still foundationally very strong. The work that we're doing for our clients today on the commercial risk side with all that's happening in the market, whether it's risk analytics, captives, the broad suite of capabilities we can help them with as they're navigating the market dynamics, are still very strong. And so pretty positive on it.

So basically, just tell me if I'm interpreting it right, with all these amazing things you're doing, you had a pretty big drag from transaction M&A., that goes away, we could see potentially an even better organic growth quarter next quarter?

I would say the first quarter last year was a very strong quarter for commercial risk. The Transaction Solutions business, I think, as Greg said, great capability subject to, obviously, some outside market dynamics that -- but we feel really strongly about that team. And when that comes back, certainly holding that skill set for us is such a great value driver for clients that we're excited about it.

Got it. Okay. And then Christa mentioned about $200 million to $225 million of CapEx expenditure targeted for this year. You're doing so many interesting things with ABS and other technologies. Anything stand out that you're investing in right now that will drive future growth?

I mean, the CapEx that I mentioned, the $200 million to $225 million, Andrew, I would say, is primarily focused on IT investments to drive long-term growth. So whether that's scale investments in our platforms to help clients innovate or whether that's in security and infrastructure to keep our clients better protected and the firm better protected, and so we're investing a lot in our Aon Business Services platform, better connectivity, better data analytics, better insight. And it's really helping our clients deliver great value to our clients -- our colleagues deliver great value to our clients.

Got it. Great. And then just last quickly, M&A pipeline and any areas of interest right now? Should we expect anything as the year progresses?

Yes. Thanks for the question. We have a fantastic M&A pipeline, and it is focused on our highest growth, highest margin, highest return on capital opportunities. And it reflects the areas we continue to invest in, areas of content and capability that we can scale across the firm. In areas like data analytics, you saw us do Tyche and ERM last year in that data analytic intensive area, areas like health and wellness and human capital, areas like our core risk offerings and helping our clients be able to model and manage risk better. And so we've got lots of areas of great opportunity around the globe, and we're really excited about it.

Got it. Thank you.

Our next question comes from the line of Robert Cox with Goldman Sachs. Please proceed with your question.

Hey, thanks for taking my question. Curious if there's any way you can help us quantify or help better understand the impact that higher T&E and an inflation is having on the expense base?

So what I would tell you is, if you look at that other general expense, which is up 20%, that is primarily driven by T&E. And the thing I would note is you're comparing it against Q1 2022, which was an unusually low year in terms of -- usually a low quarter in terms of T&E, because of COVID.

Okay. Got it. And is there anything to sort of look into -- I noticed in the presentation that you added -- that the margin expansion for this year is net of investment in long-term growth. Is that more of just calling out that the things you guys are doing in terms of investing? Or is there something to look into that?

It's exactly the same as always. So what we would say is we grow margins each and every year. And our margin expansion for the last 12 years has been 1,120 basis points or approximately 90 basis points a year. And that 90 basis points a year over the last 12 years has been a gross margin expansion higher than that, and then it nets to 90 basis points, net of the investments we're making in long-term growth. So that is consistent with the way we drive margins each and every year.

Okay. Perfect. And then maybe just shifting to the Wealth segment, very strong and above-average growth in Wealth for a second straight quarter kind of despite some headwinds in the investment business. Curious how long you expect these tailwinds could play out? Is it quarters? Is it a year? How long should we be thinking about that?

Listen, as you highlight, Robert, teams have done a terrific job in really over multiple years. We look at the last two quarters, the overall performance exceptional, really reflecting a lot of what's going on in the world out there. The regulatory changes we highlighted around GMP and others, pension risk transfer, and they were just uniquely well positioned to sort of address that. So that's really what's driving the demand from the client standpoint, and the team has done a terrific job. We did highlight in the opening comments, listen, the comp for next quarter is going to be particularly challenging in terms of sort of where we are. But fundamentals, exceptionally strong, and the Wealth has done a terrific job. Eric, what else would you add to that?

Yes, the minor point I would say, Greg, is that it's a global answer. We're seeing growth in the U.K., in particular, especially around the guaranteed minimum pension piece, but also in North America and in Europe. And so the retirement side of Wealth has been very strong for us and really like -- and you called out the investment consulting, investment advisory business. So the challenges there will lap eventually, but you've described it right.

Great. Thanks for the color.

Our next question comes from the line of Weston Bloomer with UBS. Please proceed with your question.

Hi, thanks. Good morning. My first question, I noticed real estate costs were up year-over-year for the first time, I guess, since 2021. Is that primarily just a function of the investments you're making in smart working? And just given the investments in CapEx that you've made, is it fair to assume that, that should continue to grow year-over-year throughout the course of 2023?

Yes. So the real estate is up 4%. It's reflecting back to office, in fact, reflecting the investments we made in smart working, as you said. Last year was impacted by FX. But look, I would put this in the context, Weston, of we're going to grow margins each and every year. And as I mentioned, that margin expansion over the last 12 years has been 90 basis points a year. And that margin expansion reflects a gross margin expansion much higher than 90 basis points, offset by investments in the business. And then again, on the CapEx point, we've guided to CapEx for the full year of $200 million to $225 million for the full year. That includes the CapEx investments in IT, in long-term growth and in real estate, in our smart working initiatives. And you should expect CapEx to grow each and every year in line with overall expense growth.

Great. Thank you. And a follow-up on the Wealth performance fees. You highlighted a 2Q headwind there. Is there an associated headwind in the back half of the year as well? Or is it just isolated to the second quarter? And is there a margin impact from that as well?

It is just a Q2 impact. And no, there's not an associated margin impact.

Great. Thank you.

Our next question comes from the line of Elyse Greenspan with Wells Fargo. Please proceed with your question.

Hi, thanks. Good morning. My first question, I guess, goes back to tying together some of the prior discussion on margins, right? So Christa, you guys -- you mentioned the historical 90 basis points of margin expansion that Aon has seen over the past 12 years. So I'm just trying to understand why we shouldn't expect that level, so the 90 basis points, in addition to the benefit that you guys are getting from fiduciary investment income, which I calculate was around 80 basis points this quarter? Or are you choosing to reinvest more in the business because of the strong tailwind we have from higher fiduciary investment income?

Thanks so much for the question, Elyse. And look, we do think about margins over the course of each year. And as you said, we've driven 1,120 basis points over the last 12 years or 90 basis points a year. And that 90 basis points a year is reflecting a gross margin expansion much higher, net of investments we make in the business each and every year. And we do -- we did see in Q1, 70 basis points of margin expansion, with 80 basis points of favourable impact from fiduciary investment income, Elyse, just as you said, offset by investments in the business, including in our people, technology and an ongoing headwind from resumption of T&E, all of which we manage in a disciplined way based on ROIC. And we think about margins balancing a number of factors, revenue growth, underlying expense growth, investment in our team, T&E and then the puts and takes around fiduciary investment income and FX. And we look at them all together and over the course of a full year and expect to drive margin expansion over the full quarter 2023.

Thanks. And then my second question on reinsurance, right, 9% organic in the quarter. That was stable with the fourth quarter, but I might have thought that just with the really strong rates that we saw during the January one renewals that, that growth might have picked up sequentially. Can you just give us a little bit of a -- just some of the trends that you saw in the reinsurance business that impacted that 9% in the quarter and how we should think about the balance of the year.

Eric, we'll go to you with one disclaimer here. I just want to highlight, if you think about what our reinsurance colleagues have done over the last number of years, it's really been extraordinary and at least they have really driven the level of performance with clients around the globe in a very unique platform that's been terrific. And remember, again, our efforts aren't -- are connected to rate but not tied to rate. We're helping clients understand, measure and mitigate risk, which means we're shifting programs, doing things that are unique, flexing the muscle around analytics to help them make better decisions. So what we want to see is client growth, which we have seen top line growth, which we've seen and translate into real impact, which we've seen. So I just want to highlight that long-term piece, and we see that playing out over the course of the year. But for the quarter, Eric, additional thoughts?

Yes, Greg, thanks. Look, I would say, Elyse, that reinsurance has been a strength-to-strength story for us over the last couple of years. It was a 7% growth in Q1 '22. And honestly, the work that's been done was nothing short of spectacular around the 1/1 renewals. We had double-digit growth, in fact, double-digit growth in our STG Advisory business, significant new wins in Treaty. We feel really good about the performance of the team year-to-date. And looking forward, the work that the team is doing with their insurer clients and others is in demand, right? What the carriers are trying to do to manage their own portfolios as they navigate this marketplace has really -- our team is providing real value to them as they think through that. So really proud of the work that, that team has done, not only this quarter but over the last several years, and the future looks bright for it.

And one last one, going back to that Wealth tough Q2 comp comment. You guys saw 3% organic in Wealth last Q2. So was it just that these performance fees were elevated and there were just other businesses that offset that? It just -- it doesn't seem like a tough comp. So I just want to make sure I'm not missing something.

Yes, it's simply about the performance fee. As you know, Elyse, performance fees are lumpy as we communicated.

Okay. Thank you.

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

Hey, thanks. Good morning. So I just had a question. It looked like more of the discretionary -- some of the discretionary parts of the business had a good quarter. Travel and events and Commercial Risk Solutions and human capital and health were both singled out in the press release and in the slides. I'm wondering if you could just talk about how the pipeline looks in those businesses, just given that you tend to be a little bit more economically sensitive.

Sure. I would say, our health business had a very solid first quarter. The Consumer Solutions part of that was up 9%. Core health and benefits was up significantly. Global Benefits, Human Capital double-digit, both in the analytics and the advisory and data solution spaces. So really solid start for the year for them with a strong pipeline as they go through the rest of the year.

Got it. Okay. Thanks. And then I'm just looking at the CapEx and appreciate the outlook this year, the $200 million to $225 million. If I just look back pre-COVID that is running at that level or above that level, and it's been around $100 million less than that in 2020 and 2021, ticked up in the second half of 2022. I guess I'm wondering, is there -- should we be thinking about a bigger ramp, I guess, as we enter into 2024? Just maybe some of those investments that would have occurred during the COVID year sort of ramp up here as we exit?

Thanks so much for the question, David. I would say, we expect $200 million to $225 million for 2023. And then it's reasonable to think going forward, 2024 and beyond, that CapEx will grow in line with expenses. So you're absolutely right that 2020 and 2021 will lower, really just because of the COVID situation. And as we return to more normalized levels of CapEx, 2023 is a right normalized level to start with and then grow from there based on overall expense growth.

Got it. Okay. Okay. And then maybe if I could just sneak one more in. You mentioned a lot, Greg and Christa, just on Aon Business Services. And I was just wondering, taking a step back, how many employees do you have located in Aon Business Services? And where you think you can get that to over the next couple of years? And what sort of margin implications that might have?

Yes. Look, thank you for the question. And what we would say is we're incredibly excited about Aon Business Services as a core part of Aon business strategy. It's bringing together the firm in one organization led by Mindy Simon, our fantastic COO, and bringing together an organization to drive efficiency, to drive improved service and quality and to drive innovation at scale. Because a lot of the investments we're making, David, you saw in these IT platforms and security and infrastructure, are helping us scale insights and data analytics to clients to actually deliver impact. And so we're really excited about the potential to drive productivity and margin expansion from ABS, but equally to drive improved service and quality to clients and to allow us to accelerate innovation in one area of the business across all of our countries and all of our clients immediately. And so it's proven to be an amazing competitive advantage for us over the next many years.

Okay. Thank you.

Our next question comes from the line of Mike Zaremski with BMO Capital Markets.

Good morning. This is Jack on for Mike. Just had one follow-up regarding the M&A outlook. First quarter M&A volumes in the brokerage space are down over 25% according to some media reports. So wondering, would Aon consider moving downmarket in terms of employer size into the U.S. or European insurance brokerage, middle-market area where Aon currently isn't a major player, given that some of the private equity players are being less aggressive?

I would say Jack, from our standpoint, as Christa highlighted before, we've got a terrific pipeline, lots of opportunities we see. We're always going to be looking at them in terms of how they're going to strengthen and build our business. So this is really content capability we can scale around the firm. So you might imagine, we look across the entire spectrum, and we continue to do that, looking for these kinds of opportunities at a return on invested capital criteria that sort of meets the benchmark, which is really buying back, which has the standard. So we're looking broad-based and looking for opportunities around the world.

Got it. And then maybe a follow-up on the more discretionary parts of your business. Some competitors have said that clients are acting as if some project work, which used to be maybe viewed as more discretionary, is now viewed as more necessary in today's world. I guess just any thoughts on that. Is that something that you're also seeing?

Yes. We would -- absolutely. So first, I just want to highlight, if you look back in kind of overall, what's discretionary and nondiscretionary as the baseline, very limited amounts of our business is really discretionary when you get down to it. There's sometimes timing is effective, not this year, but it's not this year, it's next year. And so a very low level from that standpoint. But what you're highlighting is exactly correct. Complexity is driving demand, and complexity and urgency is driving demand. And analytics around that at which we have make some of the -- some of these what would have been really would be nice to do almost necessary to do, particularly as you think about risk connecting with human capital and the dynamic that comes with that. Eric, why don't you add to that?

Yes. I would maybe offer two examples. One is around wellness and the human capital business that historically would have been considered discretionary. You can't have a conversation today with a Chief People Officer who is thinking about health overall, including wellness as people think about return to work, how they engage their own colleagues. And so that is becoming more of a blended discussion than ever before. And the other piece, I think, Greg, that jumps out is the risk analytics and the advisory work around the commercial risk business that you would have historically said would have been more discretionary in nature. Today, as the clients are thinking through how they navigate this challenging market, whether it's captives, whether it's risk studies, trying to understand their total cost of risk and how they can actually manage the process better. Those skills that we're able to bring to clients are in significant demand and feel more a part of the process going forward than maybe on a project-by-project basis, just to give you two examples.

Thank you.

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

Great. Thanks. Two quick ones. First, can we get a little color on what actually drove the performance fees last year? Like what are the -- what was the performance that led to that fee? And when can we expect that sort of thing to recur?

I would look at it as an asset under management discussion in terms of the volatility of the market. And so as that comes back around, you'll begin to see more of a stable platform on that. But that's what drove it in the second quarter.

Okay. Fantastic. That's perfect. And second question, Greg, I think this is for Greg. So we saw almost 200 basis points of improvement in the comp ratio. Should we think about that as improved efficiency? Or is there a concern maybe that there are some roles that need to be filled?

So it's overall -- I mean sort of overall, as you think about, Meyer, where we are sort of in the process, we were looking at this across holistically, what we're doing, continuing, as Christa said, make investments across the business to strengthen the business to years units do that. Aon Business Services underneath that drives efficiency, which Christa described. I do want to emphasize, it's not just efficiency. Aon Business Services is so much more than efficiency. It is innovation at scale and it is better service and capability, but it does drive efficiency. Let's be clear. It helps individual colleagues be more effective in serving clients and then groups of colleagues more effective serving clients. So you're seeing that reflected in all through. But we have continued to make really substantial investments in talent and content capability, and we'll continue to do that. Christa, what else would you add to that?

The thing I would say, Meyer, is you're observing lumpiness in expenses in any one quarter, and we really think about margin expansion over the course of a full year. And we commit to drive margin expansion in 2023 and every year after that. And we think about margins over the course of the full year. And we're balancing a number of factors, including investments in people, T&E and IT as well as the impacts of FX and fiduciary investment income, all with the overall goal of delivering adjusted margin expansion net of sustainable investment and long-term growth. And that's exactly what's happening in Q1 and will happen for the rest of 2023.

Okay, perfect. Thank you very much.

Our next question comes from the line of Michael Ward with Citigroup. Please proceed with your question.

Thanks, guys. Good morning. I think you guys implied that the T&E headwind was much larger in the first quarter. I was wondering if that means you expect more margin expansion over the balance of the year.

Michael, we don't give margin expansion guidance for the full year. What we can say is over the last 12 years, we've driven 1,120 basis points of margin expansion or approximately 90 basis points per year. It is -- we expect to drive margin expansion each and every year. It's not neatly 90 basis points per year because it's lumpy. And it really what it is. It's us driving gross margin expansion net of investments. And the amount we invest every year is dependent upon our opportunities for long-term growth. I would say, specifically on your T&E point, T&E was a bigger headwind this quarter because Q1 '22 had a very low T&E expense, given what was going on with COVID.

Got it. Okay. And then a somewhat different question. I wanted to ask about the IT solutions business. I believe it's somewhat small for you guys. I think you've quoted like $1 billion of lending that you've helped achieve there. So I was just hoping you could maybe discuss this business and maybe quantify as earnings or revenues, if possible, and maybe even size that -- the market of this business.

Michael, first of all, thanks for raising it. I'm happy to address it. And Eric and I can give both -- give his color commentary on this, too. But this is a phenomenal area. If you think about sort of things we do every day to move to the market, this is an area in which you step back, I think, total addressable market, what could that be? Well, start at zero right now and what could it build to? 85% of the world's value is connected back in tangible assets. So my gosh, what should this be? By the way, what has our industry done to defend those assets? Nothing today, until we started to really understand how to value IP such that it could be insured, which means it's a real tradable asset, which means you can borrow against it. And you're right, we've done a number of deals over the course of the last 18, 24 months, which has amounted to $1 billion of debt, which is fantastic. It means these entrepreneurs are raising growth capital without giving up ownership. But just think about that, raising growth capital without giving up ownership, who's interested in doing that if you're an entrepreneur? And the answer is that market is massive. It's going to take time to develop. It takes time to build markets as it always does. And we love the momentum, and we love the possibilities and potential. We're not going to quantify what it needs. We'll see it will play out over time, but it really does have a very specific application, and we're quite excited about the progress. Eric, what else would you add to that?

Yes. Maybe just to go a little bit on it. Certainly, the CPI lending piece is what we have been talking about the most that's probably the most advanced in terms of the valuation process. But you've also got M&A due diligence around IP. You've got traditional IP liability where a corporate is not actually trying to lend against it but want us to protect it. But to make all that happen, you need a couple of things, right, which is what we've been building over the last period of time. You need the valuation, right? How do you actually value IP, both in an upmarket and a stressed market? How do you liquidate it? How do you get insurer partners to devote capital to it to understand the risk themselves, to trust the valuation process, to understand how you would liquidate an example? So there's a whole ecosystem that we've been building that we are very optimistic about. And as Greg said, we've been building it a little bit each time. And the team is focused or connected in with our commercial risk partners as they build market. They're connected into understanding how to get it in front of clients and build the financial institution relationships. So there's a lot to it that has been happening for us. And we're excited about the future of it and started to see a little bit of progress last year.

Thanks so much, guys.

Our next question comes from the line of Josh Shanker with Bank of America. Please proceed with your question.

Thank you all for taking my questions. And good morning to you. First quarter is the strongest quarter for the reinsurance segment, obviously. In the back half of last year, you had a lot of acquisition-related growth in reinsurance not so much in 1Q, I mismodelled it, I'm just looking at 2Q which is a smaller quarter for revenues and reinsurance. Are you going to help me think about the acquisition revenue piece for 2Q later in the year? But given that volatility over the last three quarters, trying to be smart about it?

Why don't I take a crack at it? Listen, we -- the reinsurance business is kind of almost a tale of two halves. Certainly, the first half is much more dominated by Treaty business. Think about that through the first half of this year as always. Still some good facultative business. And obviously, with the acquisition of Tyche, the ability to do those advisory services throughout the year. The second half is much more weighted to capital market transactions, i.e., cat bonds as well as facultative reinsurance and then some casualty reinsurance that tends to go through the year as well. But if you're trying to think through the weighting of the year, property cat, which is what a lot of people focus on, is largely done by the end of June, if that helps.

In terms of the acquisition, is there a property cat in that acquisition?

I'm not exactly sure by what you mean by acquisition.

I'm saying that your 9% boost to revenues in the back half of '22 in the reinsurance segment due to acquisitions and only 1% in 1Q, I assume there's a 12-month impact on any acquisitions you make. It was less pronounced because of the volumes, I guess, in 1Q. I'm trying to think -- yes, yes.

So the acquisition around Tyche was much more advisory services, less property cat, but more pricing support and data and analytics support for those clients. A lot of the activity in the second half of last year was driven by FAC and cat bonds. So I would say that's how I would think about it.

Okay. And then I want to follow up a little bit on...

And, Josh...

Yes, go ahead.

Well, sorry, Josh, we closed Tyche in Q1. And so you will see Tyche growth included in organic growth from Q2 onwards. It will be under, as Eric said, our strategy and technology group with be advisory part of reinsurance.

That's perfect. Thank you, Christa. And I just wanted to follow up on Mike's question about T&E just a little bit. Clearly, there's a variance between 1Q '23 T&E and 1Q '22. But in my mind, I would imagine the variance would have been greater between 4Q '22 and 4Q '21. And maybe I’ll tell us a little something about the business cycle and whatnot. If you're spending more on T&E now, is that a broad situation with regards to a resumption of how your clients are spending? And two, should we expect that T&E headwind is really a '23 event more so than a '22 event?

Great question, Josh. And so what we would say is, look, we wouldn't overly read into any one quarter. It's lumpy quarter-to-quarter. And what we would say is, think about margin expansion for the full year, which is driven by a lot of things. It's been driven by our investment in people and technology to drive long-term growth, offset by some investments in T&E, a headwind from FX. There's a lot of things going into this charge. But really, that's why we come back to margin expansion for the full year 2023, similar to the margin expansion we've driven over the last 12 years of 1,120 basis points or approximately 90 basis points a year.

Well, I appreciate you staying on message. And thank you very much, Christa.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Greg Case for closing comments.

Thanks very much. Just want to say to everyone, we really appreciate you joining the call and look forward to our discussion next quarter. Thanks very much.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.