Christa Davies
Executive Vice President and Chief Financial Officer at AON
Thanks so much, Greg, and good morning, everyone. As Greg highlighted, we delivered strong operating results in the third quarter and year-to-date. Through the first nine months of the year, we translated 7% organic revenue growth into 80 basis points of adjusted margin expansion and 10% adjusted operating income growth. These results position us very well to continue to drive the results in 2023 and over the long-term. We look forward to building on this momentum as we head into the last quarter of the year.
As I reflect on our performance year-to-date, as Greg noted, organic revenue growth was 6% in Q3 and 7% year-to-date. 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 10% in Q3, includes a favorable impact from changes in FX of 2%, primarily driven by a weaker U.S. dollar versus most currencies compared to the prior year period. Reported revenue growth of 7% year-to-date includes an unfavorable impact from changes in FX of 1%, primarily driven by a stronger U.S. dollar versus most currencies compared to the prior year period.
I'd also highlight fiduciary investment income, which is not included in organic revenue growth was $80 million in Q3 and $196 million year-to-date, or 3% of total revenue in Q3 and 2% of total revenue year-to-date.
Moving to operating performance. We delivered strong operational improvement through the first nine months of the year, with adjusted operating margins of 30.8%, an increase of 80 basis points, driven by revenue growth, efficiencies from Aon Business Services overcoming expense growth, including investment in colleagues and technology to drive long-term growth. We translated double-digit adjusted operating income growth into adjusted EPS growth of 15% in Q3 and 8% year-to-date. As part of our earnings materials, FX had an unfavorable impact of approximately $0.01 per share in Q3 and an unfavorable impact of $0.20 per share year-to-date. If currency to remain stable at today's rates, we'd expect a favorable impact of $0.03 per share in the fourth quarter, totaling an unfavorable impact of $0.17 per share for the full-year 2023. I'd also note the change in other non-operating expense had a $0.15 per share or 7% unfavorable impact in Q3 and $0.59 per share or 6% unfavorable impact year-to-day. This reflects an unfavorable impact from an increase in non-cash net periodic pension expense, as well as balance sheet FX re-measurement in the current period and a gain on sale of businesses in the prior year period.
Turning to free cash flow. Cash flow from operations decreased $3 million year-over-year, reflecting double-digit operating income growth, offset in part by higher cash tax payments as we've mentioned previously. And the negative impact of working capital in the third quarter caused by temporary invoicing delays associated with the implementation of a new system. Free cash flow decreased 4% to approximately $2 billion, primarily driven by a $77 million increase in capex. Capex was elevated in the first nine months of the year compared to the prior year period as we executed a number of technology projects to drive long-term growth. I'd note capex could be lumpy quarter-to-quarter, and we expect capex to moderate in the fourth quarter. The total capex investment of $220 million to $250 million in 2023. As we've said before, we manage capex like all of our investments on a disciplined ROIC basis, and we expect it to grow the business going forward.
Now, let me share more details about our accelerating Aon United program. As Greg highlighted, we are doubling down on three strategic commitments, including: accelerating Aon Business Services, which in turn enables us to unlock advances in Risk Capital and Human Capital and our Aon Client leadership strategy. Together, these commitments will drive more value for clients, colleagues and shareholders. The investment to accelerate out three Aon Business Services operating model focuses in the same three areas we've mentioned previously, we see proven benefit and we'll now accelerate. Number one, standardized operating -- operations. Number two, integrating operating platforms. And number three, increasing product innovation and developments.
We've already made considerable progress in standardizing our operations, but we see significant opportunity, both within and across our solution lines. The work we're doing standardized operations will drive integrated service delivery platform, which provides additional opportunities, standardize, how we do business. And standardized operations combined with integrated platforms enables more effective new product development and innovation at scale. By accelerating standardization across the portfolio and establishing fewer more integrated platforms, we'll be able to deliver more analytical tools to colleagues and clients across the entire portfolio. With this underlying infrastructure in place, we'll be able to leverage advances in AI and machine learning to further accelerate the product development cycle and unlock new efficiencies across the portfolio.
Let me provide a bit more financial detail about the strategic investments. We expect total annual in-year [Phonetic] savings of $350 million to be achieved in 2026, contributing to ongoing sustainable long-term margin expansion. I'd note, we expect savings to ramp over time with annual in-year savings expected to be $100 million in 2024, $250 million in 2025 and $350 million in 2026. We do not expect material savings or impacts to cash flow in 2023. Cash restructuring charges of $900 million reflect the savings ratio of 2.6 times and a largely to technology costs and workforce optimization. I'd note, you can think of the $900 million cash restructuring charge as less than 10% of underlying free cash flow over the next three years, and the $350 million of savings, as a 4% cost takeout, relative to our cost base or approximately $9 billion. We also expect an additional $100 million of non-cash charges, largely related to asset and lease impairments. We do not expect significant incremental capex associated with the program. We expect capex will grow in line with the business in the future from a guidance of $220 million to $250 million in 2023. In the third quarter of 2023, we incurred $6 million of restructuring charges and we'll communicate charges and savings going forward each quarter.
Contemplating the program, as we look forward, we continue to expect mid-single-digit or greater organic revenue growth for the full-year 2023 and over the long-term. We expect program savings will contribute to ongoing sustainable long-term margin expansion and expect to deliver margin expansion in 2023, 2024 and over the long-term. As we've noted previously, over the last 12 years, we've delivered 1,120 basis points of margin expansion or about 90 basis points a year on average.
Our outlook for free cash flow remains strong. We expect to deliver high-single-digit free cash flow in 2023. I'd note this guidance contemplates the impact from restructuring on free cash flow in Q4. So we do not expect restructuring to have a material impact on cash flow this year. While free cash flow will be reduced in the near-term by restructuring, we expect to return to our trajectory of double-digit free cash flow growth over the long-term, driven by operating income growth and ongoing working capital improvements. As we've said previously, as we look at the opportunity in Aon Business Services and across our client-facing capability, we know that delivering the strategy will result in long-term progress against our key financial metrics, organic revenue growth, margin expansion and free cash flow growth.
Now, turning to capital allocation. Given our strong outlook for free cash flow, we expect share repurchases to continue to remain our highest return on capital opportunity for capital allocation. We believe we are significantly undervalued in the market today, highlighted by nearly $2 billion of share repurchases year-to-date. We also expect to continue to invest organically and inorganically in content and capabilities that we can scale to address unmet client needs. Our M&A pipeline continuously focused on our global priority areas that will bring scalable solutions to clients growing and evolving challenges. We will continue to actively manage the portfolio and assess all capital allocation decisions on an ROIC basis.
Turning now to our balance sheet and debt capacity. We remain confident in the strength of our balance sheet and manage liquidity risk through a well-laddered debt maturity profile and expect to add incremental debt as EBITDA grows over the long-term, while maintaining a strong investment-grade credit profile.
In summary, our strong financial results in the quarter and year-to-date reflects strong operational performance, driven by our Aon United strategy and our Aon Business Services platform. We see an opportunity to accelerate the next stage of our Aon United strategy and expect this investment will contribute to sustainable long-term top and bottom line growth, and ongoing shareholder value creation.
With that, I'll turn the call back over to the operator and we'd be delighted to take your questions.
