Christa Davies
Chief Financial Officer at AON
Thank you so much, Greg, I want to start by thanking you for the opportunity over the last 16 years to contribute to the incredible success we've had at Aon. This will be the defining role of my career and that's really what's at the heart of this decision. As you described, this decision isn't about other professional pursuits, my decision is to focus my time differently at this point in my life. I'm grateful that our work together has created the ability to me to make this choice. I must say that our 3x3 plan delivers on its full potential in the months ahead, including with the great addition of NFP. I'm going to truly miss working so closely with this team to realize the tremendous value creation that is ahead for Aon.
We're also very pleased to announce the completion of the NFP acquisition. I'm delighted to welcome the NFP to Aon. We're excited to work together to capture the growth opportunities we see for clients, colleagues and shareholders. As we announced yesterday, we closed the transaction for a total enterprise value of $13 billion. The faster than expected close date means we now expect to achieve a similar benefit a year earlier with improvements in certain metrics, noting we maintained guidance for revenue and cost synergies of $235 million, which now occur a year earlier given the close date. We achieved a lower interest rate on deal related debt of 5.7% and we issued fewer shares at 19 million.
Collectively, this results in similar deal related financial benefits of accretion and free cash flow that are realized a year earlier than initially models. We now expect the deal to add $300 million to free cash flow in 2025 and $600 million in 2026 and be accretive in 2026 and over the long-term. We've also provided detailed financial information for NFP in our materials. NFP builds on our long-term proven track record of strategically allocating capital at scale to high return opportunities to create long-term value for clients, colleagues and shareholders. And as Greg mentioned, it reinforces and accelerates our Aon United strategy and our 3x3 plan and adds to our strong momentum as we drive results in 2024 and over the long-term.
Now turning to the quarter, we delivered strong operational performance to start the year, highlighted by 5% organic revenue growth which translated into 100 basis points of adjusted operating margin expansion, 8% adjusted operating income growth and 9% adjusted EPS growth. As Greg noted, organic revenue growth was 5%, driven by ongoing strong retention and net new business generation. I'd note that fiduciary investment income, which is not included in organic revenue growth was $79 million. If you were to include fiduciary investment income, organic revenue growth would have been 70 basis points higher.
We continue to expect mid single digital greater organic revenue growth for the full year 2024 and over the long-term and as we look forward, we continue to expect that NFP will contribute to the firm's overall revenue growth through organic revenue growth, including $175 million of net revenue synergies by 2026 and inorganic growth from ongoing M&A.
Moving to operating performance, we delivered strong operational improvement in Q1, with adjusted operating margins of 39.7%, an increase of 100 basis points, driven by revenue growth, portfolio mix shift, efficiencies from Aon Business Services and restructuring savings, overcoming expense growth, including investments in colleagues and technology to drive long-term growth. Restructuring savings in Q1 were $20 million and contributed 50 basis points to adjusted operating margin expansion.
Restructuring actions completed so far are expected to generate $90 million of savings in 2024 and we expect restructuring savings will fall to the bottom line. At this time, we continue to expect $100 million of realized savings in 2024 as we continue to execute against our plans for Aon Business Services and our business.
Regarding the program, we are seeing real progress in our acceleration of Aon Business Services. This includes streamlining and improving operational processes around working capital, moving work to the best locations and enhancing clients and colleagues experience with great new tools such as our property, casualty, D&O and cyber analyzers [Phonetic]. As we've said previously, we know delivering our Aon Business Services strategy will result in long-term top and bottom line growth, as we drive more value for clients, colleagues and shareholders.
As we think about adjusted operating margins going forward, we continue to expect to drive margin expansion over the long term through ongoing revenue growth and portfolio mix shift to higher growth, higher margin areas of the portfolio, driven by efficiencies from Aon Business Services. Now that we've closed NFP, margins will be initially lower. Considering the close timing, we think the right baseline from which to measure 2024 adjusted operating margin growth is 30.6%, calculated as our 31.6% in 2023, less 100 basis point drag from NFP for the period from April 25th close through the end of 2024.
In our materials, we've detailed 2023 operating performance for NFP. On a full-year basis, we would note that NFP would have had a full year pro forma drag of 140 basis points for 2023, so there'll be some ongoing drag on 2025 margins until we lap the close in April 2025. We also expect fiduciary investment income to be relatively flat year-over-year, based on current interest rate expectations, so the tailwind that we've seen in Q1 this year will be reduced, although we remain committed to driving full year adjusted operating margin expansion in 2024 against this adjusted baseline of 30.6% and over the long term.
Turning to EPS, adjusted EPS grew 9% in the quarter, reflecting 8% adjusted operating income growth and ongoing share buyback, partially offset by a higher tax rate in the quarter. With respect to NFP, as we previously communicated, we expect the acquisition to be dilutive to adjusted EPS in the remainder of 2024, breakeven in 2025 and accretive to adjusted EPS in 2026 and beyond.
Turning to free cash flow, I'd note Q1 has historically been our seasonally small quarter from a cash flow standpoint, due primarily to incentive compensation payments. And as we've communicated before, free cash flow can be lumpy quarter-to-quarter. We generated $261 million of free cash flow in the first quarter, reflecting strong operating income growth and lower capex, offset by higher receivables, payments related to E&O, restructuring, NFP transaction integration charges and higher cash tax payments, as we've previously communicated.
As we look forward, we expect ongoing negative impacts of free cash flow in the near term from restructuring, higher interest expense and NFP deal and integration costs. The NFP acquisition strengthens our long-term free cash flow outlook with $300 million of incremental free cash flow in 2025 and $600 million in 2026. Over the long-term, we would expect to return to our trajectory of double digit free cash flow growth, driven by operating income growth and a $500 million opportunity in working capital.
Now, turning to capital allocation. We allocate capital based on return on capital and a long-term value creation, which we've done over time through core business investment, share buyback and M&A. Regarding M&A, as you look historically, we have a successful track record of balancing acquisitions, divestitures and share buyback, as we continue to optimize our portfolio against our priority investment areas on an ROIC basis. We're incredibly excited about NFP's impressive M&A engine, noting their strong history of M&A. We look forward to building on their established track record and executing against their strong pipeline to drive future growth in this space within our ROIC framework.
We still expect share buyback to remain the top priority for capital allocation. As we think about capital allocation in 2024, we observed there are puts and takes around free cash flow that we've communicated and while buyback will be lower than last year, we expect it will still be substantial at a $1 billion or more based on our current M&A expectations for the rest of the year. We have a very strong long-term free cash flow outlook for the firm and are confident that share repurchase will continue to remain our highest ROIC opportunity for meaningful ongoing capital allocation over time.
Turning now to our balance sheet and debt capacity. We remain confident in the strength of our balance sheet. As previously communicated, we funded the cash and assumed liabilities portion of the NFP purchase with approximately $7 billion of new debts, with $5 billion raised in March 2024 and $2 billion borrowed at close. And I'd note the average interest rate for the $5 billion of transaction related senior notes and the $2 billion term loan is 5.7%, about 80 basis points better than what we modeled when we announced the deal.
We expect our credit ratios to be elevated over the next 12 to 18 months, as we bring our leverage ratios back in line with levels consistent with our credit profile, 2.8 to 3 times debt to EBITDA on a GAAP basis. This is driven by substantial free cash flow generation and incremental debt capacity from EBITDA growth, noting our track record of effectively managing leverage within current ratings.
In summary, our operating performance in Q1 is a strong start to the year and we're well positioned to build on this momentum in the rest of the year. We're delighted to have closed NFP acquisition ahead of schedule, enabling us to achieve financial benefits of accretion and free cash flow a year earlier than initially modeled. We look forward to enhancing NFP's strong client relationships with Aon's content and capabilities and see real opportunity to learn from each other and bring better solutions to our clients together. It's a another step forward in our 3x3 plan as we accelerate our Aon United strategy, catalyzed by Aon Business Services and reinforced by the restructuring program.
With that, I'll turn the call back to the operator and we'd be delighted to take your questions.
