Aon PLC

Good morning and thank you for holding. Welcome to AMPLC's fourth quarter 2025 conference call. At this time, all parties will be in the listen-only mode until the question and answer portion of today's call. I'd also like to remind all 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 historical results of those anticipated. For information concerning these risk factors, please refer to our earnings release for this quarter and to our most recent quarterly or annual SEC filings, all of which are available on our website. Now, it's my pleasure to turn the call over to Greg Case, President and CEO of Aon PLC.

Good morning, and welcome to our fourth quarter and full year earnings call. I'm joined by Edmund Reese, our CFO, and the financial presentation, which Edmund will reference in his remarks, is posted on our website. 2025 was a year of great strategic progress and performance milestones for Aon. Among the highlights, we advanced the disciplined execution of our three by three plan, which continues to accelerate our Aon United strategy by further integrating risk capital and human capital, expanding Aon client leadership, and leveraging Aon business services to drive greater capability, innovation, and efficiency. This work is enhancing our relevance and delivery capability to meet rising client demand amid increasing complexity. We outlined this momentum at our first Investor Day in two decades, where we demonstrated the strength of Aon United and the central role of the 3x3 plan. including the power of ABS. We believe our performance this year is proof that our strategy is working, producing tangible, sustainable results today and positioning us for long-term success. We continue to innovate. ABS provides the foundation to deliver innovative solutions and deploy AI where it drives real value across our business. We expanded our risk analyzers, launched Aon Broker Copilot, and more recently launched Claims Copilot. In addition, we help clients access alternative forms of capital through cap bonds, which may include parametric triggers, where market issuance rose more than 40% in 2025, and Aon's issuance increased more than 50%. And we continue to innovate in population health by helping employers manage healthcare costs through GLP-1 strategies. We also launched our data center lifecycle insurance protection program, DCLP, which provides coverage for data centers from construction through operational readiness. under a single integrated facility. This solution continues to gain traction, and we recently announced a billion-dollar expansion, increasing total capacity to 2.5 billion. We substantially advanced our middle market strategy, including great progress in building upon our independent and connected strategy with NFP. The business is performing well with strong producer retention, as we build upon NFP's strong client relationships with the full breadth of Aon's capabilities. We're also accelerating the connection of NFP onto our ABS platform, which we believe will further enhance performance over time, highlighting our even greater conviction in the power of ABS to onboard middle market companies. And we continued our very effective tuck-in M&A strategy, further accessing the large $31 billion North American addressable market. As we close 2025, we enter the final year of our three-by-three plan with strong momentum. fueled by our client-centric strategy and integrated capabilities that enable us to win more opportunities, deepen client relationships, and deliver more value in an increasingly complex macro environment. Turning to our results, we finished the year strong with continued momentum in the fourth quarter and delivered on our full-year objectives, including 6% organic revenue growth for the second straight year, 90 basis points of adjusted operating margin expansion, strong adjusted EPS growth, and double digit free cash flow growth. These results demonstrate the consistency and durability of our business model and the impact of our A&United strategy. They also reflect investments in revenue generating talent and the impact of our solutions. To set the context for our results, I will highlight four representative examples that are driving results and fueling momentum into 2026. a client story that shows how our teams are trusted strategic advisors to clients and how we bring the best of Aon to the market. After partnering with a large international construction client for several years, the company needed a dedicated broker to support the full lifecycle of a new data center project. We combined our role as a trusted advisor with a united global team, bringing together account leadership with construction, data center, energy, and cyber specialists to deliver an integrated proposal Our winning response showed the full capabilities of AI, including DCLP, advanced climate analytics, and proprietary risk analyzers, all aligned to the client's long-term growth strategy. We demonstrated distinctive ability to support both construction and operations, leveraging data and insights to improve capital efficiency and resilience. The client credited our team's expertise and our global connectivity and capabilities as central to the win. reinforcing our strength in leveraging trusted relationships and leading analytics to create high-quality growth opportunities. Second, we continue to innovate and lead in the data center opportunity. In addition to our DCLP capacity increase and the client story I just referenced, our reinsurance team recently designed and placed the first-ever data center-specific treaty, delivering a solution that aligns up to $5 billion of capital, through the insurance value chain behind a single leading insurer. And we're actively engaged with several others to help them expand and strengthen their capabilities to provide capacity for clients. Our advisory capabilities around site selection, design, and engineering, as well as tremendous data and advanced analytics are critical to informing effective capital protection decisions in the face of extreme weather, supply chain, and cyber risk. And while we're still in the very early days of this generational opportunity with data centers, We have some exciting wins under our belt, and our leadership in this space is another factor that supports sustainable organic revenue growth. It's also another impressive example of Aon innovating to solve client problems. Third, talent continues to be a critical driver of our success and ability to achieve sustainable growth. Our client-centric strategy remains focused on attracting, developing, and retaining top performers who see the value they can bring to clients and grow their business with our best-in-class analytics and capabilities. We continue to hire in high-growth priority areas, and revenue-generating talent increased a net 6% this past year. We're also expanding with existing clients through our client leadership and seeing higher new business and better retention with ACL-covered clients. Finally, our capital position, which Edmund will detail further, puts us in a position of strength and flexibility. This year, we continued to generate strong free cash flow and further strengthened our capital position through disciplined portfolio management, including the sale of NFP wealth. Our enhanced capital position will remain focused and balanced on investments in high growth opportunities and capital return to maximize shareholder value. In summary, as we head into 2026, the final year of our three-by-three plan, we're well positioned to continue our strong execution, The four megatrends we've highlighted, trade, technology, weather, and workforce, are as relevant as ever. We're building momentum with clients as our globally connected team is equipped to deliver data-driven insights and better outcomes for our clients. At the same time, we're committed to delivering strong performance, including sustainable organic revenue growth supported by our investments in ABS and talent. It's inspiring to see all that our colleagues have accomplished on behalf of our clients to achieve greater resilience and growth over the last year. Our conviction and level of excitement as we execute our strategic vision has never been greater. AON United is more than just delivering on objectives in any given year. It's about delivering for our clients, colleagues, and shareholders over the long term. And in an increasingly complex world, AON is better positioned than ever strategically, operationally, and financially to achieve this mission. to our over 60,000 colleagues around the world. Thank you. Thank you for your relentless commitment to our clients, each other, and our AI United strategy. Now, let me turn the call over to Edmund for his comments and insight. Edmund?

Thank you, Greg, and good morning, everyone. I'm energized to be here discussing Q4 2025, a quarter that delivered results within our guidance expectations and capped off strong full-year performance that continues to reflect Our disciplined execution of the three-by-three plan, the power of our financial model, and the momentum we have built across the firm, even in this macro environment. Throughout the year, we've been focused on communicating our strategy and the consistency of our delivery. Our team is executing, and it is reflected in our results. Before diving into the quarter's results and our outlook for 2026, I want to take a moment consistent with how we frame this section each year to underscore the core growth drivers that are underpinning our momentum. These drivers reflect the intentional choices we've made over the first two years of the three by three plan and are not only delivering in the current period, but also fortifying our ability to sustain performance through 2026 and beyond. First, With two consecutive years of 6% organic revenue growth, we have more conviction than ever in our ability to deliver sustainable top-line growth. This conviction is grounded in the strength of our 3x3 plan, now in its maturity phase, and in the deliberate investments we've made to support long-term growth. We continue to add revenue-generating talent, strengthen Aon client leadership, and accelerate our presence in the middle market, where demand signals remain robust and clients continue to benefit from our broad capabilities. These investments are contributing to top-line growth today, and they have a cumulative and compounding impact that benefits the years ahead. Second, we achieved critical milestones by integrating NFP and delivering double-digit free cash flow growth in 2025. These results are the product of discipline prioritization and execution. And third, our strong operating cash generation, coupled with our disciplined portfolio management, including the sale of the NFP Wealth Business, brings our total capital available in 2026 to $7 billion. This means that in addition to our organic revenue growth, we are in an even stronger position from which to execute our balanced capital allocation model, including the pursuit of high return inorganic investments that amplify our organic growth momentum. Overall, our performance this quarter and for the year demonstrates the power of our disciplined execution and the strength of the strategic choices we've made to drive the durable growth reflected in our results. With that context, let's turn to the detailed results. Our full-year performance is right in line with our guidance for mid-single-digit or greater organic revenue growth, adjusted operating margin expansion, strong earnings, and double-digit free cash flow growth. Organic revenue growth was 6% and total revenue increased 9% year over year to $17 billion. Adjusted operating margin expanded by 90 basis points over last year and reached 32.4%. Adjusted EPS was $17.07, up 9% year-over-year. And finally, free cash flow increased 14% over 2024. For the fourth quarter, organic revenue growth was 5%, and total revenue impacted by the wealth and straw dispositions increased 4% year-over-year to $4.3 billion. Adjusted operating margin expanded by 220 basis points over last year and reached 35.5%. Adjusted EPS was up 10% to $4.85. And finally, free cash flow increased 16%. Let's get into the details of these results, starting with organic revenue growth on slide six. Organic revenue growth was 5% in the quarter, with both commercial risk and reinsurance delivering 6% or better growth on the back of new business and continued strong retention. This performance reflects the importance of hiring and priority growth areas and the strength of our analytical and advisory capabilities, which are helping clients capitalize on favorable pricing conditions. In commercial risk, Six percent growth reflected continued strength in our core P&C business globally, including strong growth in the U.S., EMEA, and Latin America. Additionally, construction delivered another quarter of double-digit growth driven by ongoing demand for large global infrastructure projects, including data center construction for major technology clients. I'll also note that while the lift from M&A services was modest, We remain well positioned in this space and expect M&A activities to support our mid-single-digit or greater growth as we enter 2026. Reinsurance delivered 8% growth driven by double-digit growth in both insurance-linked securities and our strategy and technology group, as well as continued strength in facultative placements. Insurance-linked securities benefited from record cap bond issuances which reached $59 billion outstanding as investors increasingly seek uncorrelated asset classes. STG also saw elevated demand for our analytics, which helped clients access alternative forms of capital. Looking ahead, our data indicates softer Jan 1 property renewals with rate declines of 15% to 20%. Even with this market headwind, We continue to expect full-year 2026 organic revenue growth in line with our mid-single-digit or greater objective, supported by higher limits, ongoing strength in international facultative placements, record activity in insurance-linked securities, and growing demand for STG analytics. We are uniquely positioned at the intersection of insurance and capital markets helping clients access alternative capital at scale. This positioning becomes even more valuable in a softer rate environment where innovation matters as much as price. Health solutions grew 2% this quarter, and this growth reflects mid-single-digit growth in our core health and benefits offerings across the U.S. and EMEA, partially offset by delayed closed sales moving in the Q126 and slower discretionary spend in talent solutions. While consulting services in areas like talent may experience short-term deferrals, these needs are structural, and demand typically rebounds as conditions normalize. We continue to expect health to remain an area of strength and well within our mid-single-digit or greater objective. Wealth generated 2% growth, in line with the 1 to 2% we guided to last quarter. Performance for the quarter and the full year was led by strong advisory demand in the UK and EMEA related to ongoing regulatory change. Importantly, for the full year, all four of our solution lines were in line with our mid-single-digit or greater objective. Growth was broad-based with commercial risk and reinsurance at 6%, and each of our human capital solutions delivering 5%. Let me walk through the components of our Q4 organic revenue growth on slide seven. We extended our consistent track record of strong new business generation in Q4. New business contributed nine points to organic revenue growth supported by steady new client acquisition and expanded mandates with existing clients. Our investment in revenue generating talent, particularly in high-growth sectors like construction and energy, has supported the 10-point new business contribution to organic revenue growth for the year. In 2025, despite intense competitive pressure for talent, revenue-generating hires were up 6%, firmly within our 4% to 8% objective. The 2024 and 2025 cohorts for tracking to similar seasoning curves for both incremental revenue and timing, and together contributed approximately 50 basis points to 2025 organic revenue growth. We expect continued momentum in compounding benefits from the seasoning of the 2024 and 2025 cohorts. We plan to continue investing in growth and to expand this population by an additional 4% to 8% in 2026, and again, this is because we see specific opportunities in high-growth priority areas. Q425 retention remains strong at a mid-90s rate, supported by continued improvement in commercial risk and reinsurance. Increased engagement through our enterprise client group and enhanced service delivery from our ADS capabilities are playing a meaningful role in sustaining and strengthening client relationships. Net new business contributed three points to organic revenue growth in the quarter. Net market impact, which captures the impact of rate and exposure, contributed one point to organic revenue growth, consistent with each quarter this year and within our zero to two-point estimated range. Reinsurance was down primarily from rate declines of 10-1 renewals, and that impact was offset by limit and coverage increases across cyber and commercial risk, supporting clients managing rising healthcare costs and health, as well as rate benefits and wealth. And one final point on revenue. Fourth quarter fiduciary investment income was 63 million, down 17% versus the prior year, as higher average balances were more than offset by lower interest rates. Our full year 2025 results underscore why we have high conviction in our durable mid single digit or greater organic revenue growth model. We are executing on each component of the model. First, delivering nine to 11 points of growth from new business. We deliver 10 points with significant contribution from our investment hires and NFP revenue synergies. Second, Maintaining a mid-90s high retention rate, we improved 50 basis points over last year. Finally, achieving a zero to two-point net market contribution in this macro environment. We consistently delivered one point in each quarter this year. Turning now to margins. On slide eight, Q4 adjusted operating income increased 11% to $1.5 billion this and adjusted operating margin expanded 220 basis points to 35.5%. For the full year, adjusted operating margin was 32.4%, and we delivered 90 basis points of margin expansion. We continue to expand margins primarily through ABS-enabled scale improvements, ongoing disciplined expense management, including the NFP OpEx synergies, and the benefits from the restructuring initiative to accelerate our three-by-three plan. We ended the year with 160 million in restructuring savings, 10 million ahead of our plan, supported by 50 million of savings in Q4. Restructuring savings contributed approximately 115 basis points to adjusted operating margin in Q4 and approximately 90 basis points to full-year margin expansion. As we enter the final year of the Accelerating Aon United AAU Restructuring Program. We have identified additional opportunity to accelerate the NFP integration into ABS, leveraging our global capability centers and deepening integration across our technology platforms. We now expect to complete the AAU investment at 1.3 billion, and we are firmly on pace to deliver 450 million and total savings. We have used the AAU program to strengthen our foundation for ongoing margin expansion within our core business operations. And we have clear visibility to growth at higher profit margins driven by continued operating leverage through ABS. Moving to interest, other income and taxes on slide nine. Interest income was $14 million in the fourth quarter and up $10 million over last year, driven by interest earned on proceeds from the sale of NFP wealth. Interest expense came in at $191 million, $16 million lower than last year, primarily due to lower average debt balances. We expect Q126 interest expense to be approximately $185 million. Other expense was $21 million compared to a $2 million benefit last year driven by gains from balance sheet currency exposure, gains from the divestment of our non-core personal lines business, and our hedging program. We estimate Q126 other expense to range between $20 and $25 million. Finally, the Q4 tax rate was 20%. bringing the full-year tax rate to 19.5%, 60 bps better than last year, and in line with our estimate of 19.5% to 20.5%. Turning now to free cash flow and capital allocation. On slide 10, we generated $1.3 billion of free cash flow in the fourth quarter, bringing our full-year free cash flow to $3.2 billion, an increase of 14%. compared to 2024. As we expected, our double-digit free cash flow was driven by strong adjusted operating income, including contributions from NFP as integration costs wound down. Turning to capital on the right-hand side of the page, our strong free cash flow growth enabled us to continue to execute our capital allocation model. We paid down $1.9 billion of debt in 2025, and coupled with strong earnings growth, lowered our leverage ratio to 2.9 times. Both the level and the timing are consistent with the 2.8 to 3 times Q4 2025 objective established when we announced the NFP acquisition. Again, reflecting our disciplined execution. Additionally, we remained active in M&A. continuing our programmatic tuck-in acquisitions across high-growth priority areas, including middle market acquisitions through NFP, which required $42 million of EBITDA for the full year, in line with our expectations. And finally, in 2025, we returned $1.6 billion in capital to shareholders, including $1 billion in share repurchases. The strength of our results in 2025 demonstrate commitment to our balanced capital allocation model, prioritizing our leverage objective, consistently growing the dividend, and executing our disciplined approach to high return M&A and capital return. I will conclude my prepared remarks on slide 11 with our 2026 guidance and some forward-looking perspective on our growth objectives. As we enter the final year of our three-by-three plan, The drivers of growth are stable, and we are executing on both our strategy and the financial model with precision. We carry substantial momentum in the 2026. And in summary, our full year 26 guidance includes mid-single-digit or greater organic revenue growth, 70 to 80 basis points of adjusted operating margin expansion, strong adjusted EPS growth, in double-digit free cash flow growth. And let me walk through the key drivers of each guidance point, starting first with organic revenue growth. We expect mid-single-digit or greater organic revenue growth, fueled by recurring new business wins with both existing and new clients, the compounding contribution from revenue-generating hires and priority areas and within the enterprise client group, and accretive growth in the middle market, including revenue synergies from NFP. We also expect continued mid-90s retention and zero to two points from the net market impact, which assumes we continue to offset rate pressure in property and treaty. On the adjusted operating margin, we expect 70 to 80 basis points of expansion driven by three key components. First, the impact of lower interest rates on investment income from fiduciary balances is expected to dilute margins by 20 basis points. Second, we expect 180 million in restructuring savings over 26 and 27, including additional savings from accelerating the NFP integration. From 2026, 100 million of savings will contribute approximately 50 basis points of margin expansion. Third and most important, We expect 40 to 50 basis points on margin expansion from the operating leverage in the scalable ABS platform. Our ABS growth engine continues to deliver scale benefits, capacity for growth investments, and margin expansion that drives earnings growth. Our expectations for mid-single digit or greater organic revenue growth and 70 to 80 basis points of adjusted operating margin expansion support a strong adjusted EPS growth outlook for 2026. Embedded in this earnings guidance is a two-point EPS tailwind from FX based on today's FX rates remaining stable, a two-point headwind from the sale of the NFP wealth business, an expected tax rate of 19.5 to 20.5%, excluding any extraordinary discrete items, and a non-cash pension expense of 80 million. Our financial model is built on sustainable top-line growth, consistent strong earnings, and reliably converting those earnings in the double-digit free cash flow growth. In 2026, we expect 4.3 billion of free cash flow generation from operating income and working capital improvements. The tax impact from the over 2 billion in proceeds generated from the NFP well sale will be reflected in operating cash flows and will reduce free cash flow by approximately 300 million prior to any benefit from the usage of those proceeds. Of course, with over 2 billion in proceeds, we have significantly strengthened our capital position with approximately 7 billion of available capital and substantial strategic flexibility. In 2026, we will remain committed to disciplined capital allocation, balancing investment for growth with capital return to shareholders. We plan to return at least $1 billion in share repurchases while continuing to evaluate our inorganic pipeline for high margin, high growth areas across risk capital and human capital. In closing, our performance in 2025 demonstrates the resilience of the firm and the precision with which we are managing the business, executing the three-by-three plan, delivering on our financial model, and allocating capital with a sharp focus on returns. Our disciplined execution is evident in our organic revenue growth margin expansion, and enhanced earnings power. This consistency gives us confidence that what you're seeing today is not episodic. It is the result of our strategy and financial model producing durable outcomes and gives us even greater conviction in our ability to continue creating long-term value for shareholders. So, with that, let's open up the line for questions. Kevin, back to you.