Aon PLC

Q126 retention remained strong in the mid-'90s, improving 20 basis points over last year, led by commercial risk and reinsurance, as deeper enterprise client group engagement and ABS-driven insights enhanced client value and relationship depth. Net new business contributed five 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 and was delivered in line with estimates despite a softer pricing environment in P&C and reinsurance. Rate-driven pressure and reinsurance following 1.1 renewals was offset with higher limit and expanded coverage in commercial risk, further reinforcing that growth is primarily driven by business investment and client demand. and remains largely uncorrelated with pricing cycles. And one final point on revenue. First quarter fiduciary investment income was $55 million, down 18% from the prior year, as higher average balances were more than offset by the lower interest rates. On slide eight, Q1 adjusted operating income was up 8% to $2 billion, and adjusted operating margins expanded 70 basis points to 39.1%. Through ABS, we are structurally lowering our cost base by reducing technology costs, standardizing and automating processes, including the integration of NFP, and embedding AI into our development and operational workflows. These actions are not only driving margin expansion, but also creating durable capacity for investments that support sustainable top-line growth. Restructuring savings were $25 million in the quarter, contributing 50 basis points to adjusted operating margin. We remain on track to deliver $100 million of savings in 2026, advancing toward our goal of $450 million in total savings by 2027, with 2026 marking the final year of our restructuring investment. Moving to interest, other income, and taxes on slide 9. Interest income was $12 million in the first quarter and up $7 million over last year, driven by interest earned on proceeds from the sale of NFP Wolf. Interest expense came in at $179 million, $26 million lower than last year, primarily due to lower average debt balances. We expect Q2 26 interest expense to be approximately $180 million. Their expense was $15 million lower than last year, driven by lower non-cash pension expense, and the re-measurement of balance sheet items. We estimate Q2 26 other expense to range between 15 million and 20 million. Finally, the Q1 effective tax rate was 20.3%, 60 basis points lower than Q1 25, reflecting the geographic mix of income growth and the favorable impact of discrete items. Our full year tax outlook remains unchanged. at 19.5% to 20.5%. Turning now to free cash flow and capital allocation, on slide 10, we generated $363 million of free cash flow in the first quarter, reflecting strong operating income growth. This is a strong start to the year, and we continue to expect double-digit free cash flow growth in 2026. Turning the capital on the right-hand side of the slide, our strong free cash flow growth enabled us to continue to execute our disciplined capital allocation model, balancing investment for growth with capital return to shareholders. As Greg mentioned, in April, we increased our quarterly dividend by 10% to 82 cents per share, marking the sixth consecutive year of double-digit dividend increases and reflecting the cash-generating strength and durability of our business and financial model. We also remained active in M&A and allocated $349 million toward high-growth, tuck-in acquisitions and middle market that align with our strategic priorities and return thresholds. The largest use of capital in the quarter was shareholder return. In total, we returned $662 million to shareholders, including $500 million in share repurchases, a significant step up from the average $250 million per quarter over the prior eight quarters. As I noted earlier, we were proactive and leaned in the market conditions, repurchasing shares at prices well below the firm's intrinsic value. And that conviction is grounded in the fundamentals of the business, driving strong performance today and also informed by the investments we are making to drive future growth in talent, AI-embedded analytics, and scalable platforms, which we believe increase the long-term earnings power and terminal value of the firm. Taken together, these actions reflect the consistent application of our balanced capital allocation model, maintaining our leverage objective, consistently growing the dividend, in executing our disciplined approach to high return M&A and returning excess capital to shareholders, ensuring capital allocation continues to enhance long-term shareholder value. I'll conclude my prepared remarks on slide 11 with a few thoughts on our financial objectives and 2026 guidance. The first quarter 2026 performance reflects a start to the year that is right in line with our expectations and reinforces the strategic choices we have made to drive sustainable growth. Accordingly, we are reaffirming our 2026 full-year guidance for mid-single-digit or greater organic revenue growth supported by continued new business wins, the compounding contributions from our revenue-generating hires, and accretive growth in middle markets. We delivered 70 basis points of margin expansion in Q1, and we are seeing the benefits of efficiency gains from our scalable ABS platform in continued progress on our restructuring objectives. As a result, we are reaffirming our expectations for 70 to 80 basis points of margin expansion for the full year. The combination of organic growth and margin expansion supports our outlook for strong earnings growth in 2026, and with high conversion of those earnings into cash, positions us to deliver double-digit free cash flow growth for the year. Our strong capital position affords us the financial flexibility to actively deploy capital across multiple avenues, supplementing organic growth with strategic M&A while also executing opportunistic share repurchases. We have substantial financial capacity to pursue our high-quality M&A pipeline, and we remain firmly on track to deliver at least $1 billion in share repurchases for the year. As we move to Q&A, I want to emphasize that the performance you are seeing is the result of deliberate decisions. Our organic investments as part of the 3x3 plan, $1.3 billion in talent, and the AI embedded capabilities that enable that talent to bring faster, deeper insight to clients, as well as our inorganic actions, are all intentionally aligned to deliver consistent earnings and free cash flow growth. We are already realizing productivity improvements today, and we are reinvesting those gains back in the capabilities that both expand what we can deliver for clients and how efficiently we deliver it. In a world where technology increasingly enables and amplifies differentiated insight, advice, and outcomes, this reinvestment cycle is critical. When executed well, it expands the addressable market by making risk transfer more relevant and increasing insured risk as a percentage of GDP. while also unlocking incremental AI-enabled opportunities to gain share with existing and prospective clients. Our investment leadership here strengthens our long-term growth profile, reinforces our conviction in the firm's growing terminal value, and supports long-term value creation for shareholders. So with that, let's open up the line for questions. Kerry, back to you.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Please limit yourself to one question and one follow up. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question will come from Elise Greenspan with Wells Fargo.

Hi, thanks. Good morning. My first question, I was hoping if you could just provide a little bit more color on just the contributions from data centers to organic growth in the quarter. I know Edwin said I think it was three times the level this year than last year, but hoping just to size it a little bit to get a sense of the contribution to organic in Q1 and expectations for the next few quarters of the year.