Aon - Earnings Call - Q2 2025

Executive Summary

• Q2 delivered 11% total revenue growth to $4.155B, 6% organic growth, and 19% adjusted EPS growth to $3.49; free cash flow rose 59% to $732M, underscoring strong earnings conversion.
• Results were broad-based across solution lines; adjusted operating margin expanded 80 bps to 28.2% on ABS-driven operating leverage and $35M restructuring savings; management reaffirmed full-year 2025 guidance.
• Versus consensus, Aon posted an EPS beat ($3.49 vs $3.41*) and a slight revenue miss ($4.155B vs $4.163B*); EBITDA was essentially in line ($1.207B vs $1.212B*).
• Catalysts: reaffirmed margin expansion (80–90 bps) and double-digit FCF growth, NFP integration synergies tracking ($80M 2025 revenue synergies; $350M run-rate restructuring by 2026), and AI-enabled analytics (Broker Copilot) supporting sustained organic growth.

What Went Well and What Went Wrong

What Went Well

• Broad-based organic growth: Commercial Risk, Reinsurance, and Health each delivered 6% organic growth; Wealth grew 3%, with strong international health and NFP contributions.
• Margin expansion and cost actions: Adjusted operating margin up 80 bps to 28.2%; $35M restructuring savings in Q2; lower interest expense YoY; deleveraging to 3.4x leverage ratio.
• Strategic innovation and AI: Launch of Broker Copilot and first-of-its-kind Aon Surge Stop Loss in cyber reinsurance; “Broker Copilot augments predictive broking, enabling Aon brokers to match capital to risk” (Greg Case).

What Went Wrong

• Other income normalization: Other income fell to $56M from $236M due to prior-year gains; adjusted other expense increased to $32M.
• Lower fiduciary investment income: $66M vs $75M in Q2 2024; lower rates offset higher balances.
• Reinsurance market headwinds: April 1 property renewals saw rate declines of 5–20%; modest unfavorable market impact partly offset by ILS/facultative growth.

Transcript

Operator (participant)

Good morning, and thank you for holding. Welcome to Aon's second quarter 2025 conference call. At this time, all parties will be in a listen-only mode until the question-and-answer portion of today's call. I would 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 or 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 filing, all of which are available on our website.

It is now my pleasure to turn the call over to Greg Case, CEO of Aon. Thank you. Please go ahead.

Greg Case (President and CEO)

Thank you, Donna. Good morning, and welcome to our second quarter earnings call. I'm joined today by Edmund Reese, our CFO, and as always, we posted a detailed financial presentation on our website, which Edmund will reference in his remarks. To begin, we want to take a moment to reflect on the momentum coming out of our Investor Day, where we detailed why and how our client-centric Aon United strategy drives sustainable top-line growth and exceptional free cash flow per share growth. Aon United, operationalized and accelerated by the 3x3 plan, is driving meaningful performance demonstrated in our Q2 results, with continued momentum as we enter the second half of 2025 and look ahead to 2026. Let's start with some Q2 highlights. We delivered a strong quarter in line with our expectations, including 6% organic revenue growth, 19% adjusted EPS growth, and 59% free cash flow growth.

For clients facing an increasingly complex operating environment, our work to deliver for them has never been more essential. We remain confident in our ability to meet their evolving needs both now and over the long term. At Investor Day, we discussed how market realities shaping the current operating landscape are complex and constantly evolving. Clients of all sizes, industries, and geographies are challenged with how to address and respond to the interconnected megatrends of trade, technology, weather, and workforce. The pressure is only growing. In the weeks following Investor Day alone, we've seen several major developments that demonstrate the impact and connectivity of these megatrends: the enactment of U.S. tax legislation and continued shifts in the global tariff landscape, severe flooding and convective storms across the U.S., alongside record-breaking heat waves in both the U.S.

and Europe, events that have driven historic first-half catastrophe losses, disrupted supply chains, displaced workforces, and caused widespread property damage. Significant workforce changes announced by some of the world's largest technology companies, citing the accelerated impact of AI on roles and responsibilities. These events and many others reinforce the importance of our Aon United strategy as we help clients make better decisions and achieve better outcomes in what is arguably the most complex operating environment they've ever faced. Our strategy is working. As we detailed on Investor Day, the industrial strength foundation powering Aon United and driving sustainable top-line growth and margin expansion is Aon Business Services. With ABS fully operationalized, we're winning more share in core markets, capturing demand in existing markets, and creating new demand in new categories. Let me highlight a few specific examples from the second quarter.

We are winning more in the core by deepening relationships with existing clients. One of the world's largest investment firms, who previously engaged us solely on risk capital topics, recently awarded us their U.S. and global benefits advisory business. This win was driven by two key factors. First, our integrated risk capital and human capital structure is unique in our industry and allows clients to employ a holistic risk strategy across their full business. Leveraging our scale and analytics, this leading global company could see their business differently across their own internal silos. Second, our differentiated human capital analytics provide globally comparable insights that help them make better data-driven decisions. We are also capturing demand in existing markets by developing new capabilities. In the second quarter, we launched Aon Broker Copilot and placed our first client program. A game changer for our brokers, advisors, and clients.

This capability leverages Aon's global scale, proprietary data, and embedded AI to provide an enhanced view into how the global insurance market is pricing risk. Arming our team with insights into real-time market behavior, Broker Copilot augments predictive broking, enabling Aon brokers to match capital to risk in an unparalleled manner. Another example of how ABS assets support our colleagues to capture new demand and serve clients with superior solutions. Finally, we're creating new demand in new ways by innovating on behalf of clients in categories like cyber, an expected area to drive outsized growth for Aon as sourcing sufficient and tailored cyber insurance remains a pressing concern for clients. In Q2, we developed and placed a first-of-its-kind cyber reinsurance offering, Aon Surge Stop Loss, which enables enhanced protection against cumulative cyber losses.

Unlike traditional reinsurance products that require a specific event-driven event to trigger coverage, Aon Surge Stop Loss triggers based on aggregate loss thresholds, resulting in broader, more flexible protection. An important evolution in the cyber reinsurance market, given the ever-increasing risk of cyber attacks. We also continue to invest in client-facing talent across high-growth areas, and our revenue-generating hires are up 6% through June 30. Colleagues come to Aon because they recognize the competitive advantage of Aon's differentiated platform and how it enables them to deliver superior client outcomes. Finally, the $31 billion North American middle market remains a significant growth opportunity. Our integration of NFP continues to progress very well, and we're making meaningful progress toward our $80 million net revenue synergy target for 2025, as our combined team continues to unlock value by leveraging complementary capabilities and deep client relationships.

It's clear our Aon United strategy, powered by ABS, continues to drive innovation, deliver actionable insights, and match client risk with new sources of capital. Our strong first-half performance and continued progress against the commitments of the 3x3 plan reinforce that we have the right strategy and plan in place to deliver long-term value. As a result, we reaffirm our 2025 full-year guidance and our commitment to deliver double-digit free cash flow growth over the 2023 to 2026 3x3 plan period. To conclude, I will highlight three points. First, as the global environment continues to evolve, Aon's capability and integrated solutions are mission-critical for clients to mitigate complexity, protect assets, and grow their businesses. Second. Our team is confident in our ability to capitalize on the compelling opportunities ahead and deliver long-term shareholder value. The results today are just another proof point of the strength of our strategy.

Third, we have momentum across our businesses. We are attracting great talent. We are capturing the growing middle market opportunity, and we are winning more with both new and existing clients. Finally, to our over 60,000 colleagues around the world, thank you. Thank you for your commitment to our clients, each other, and our Aon United strategy. Your dedication is the driving force of our firm. Now I'll turn the call over to Edmund for his thoughts on our financial performance and long-term opportunity to drive shareholder value creation. Edmund, over to you.

Edmund Reese (CFO)

Thank you, Greg. Good morning, everyone. I'm excited to be here to discuss our second quarter results, which reflect both execution and the growing momentum of our 3x3 plan. Before we get into the details of our second quarter results, I want to take a moment to elevate what matters most. There are three key proof points that best capture the momentum behind our strategy and the strength of our performance. These highlights provide the right context for the details that follow and underscore how our execution on the 3x3 plan is translating into tangible results. First, we see clear evidence that our financial model is delivering as designed. Our investments in revenue-generating hires, equipped with the analytical tools and client experience enhancements enabled by Aon Business Services, or ABS, are translating into sustainable mid-single-digit or greater organic revenue growth.

Organic revenue growth was 6% for the quarter, and we are winning new business, expanding our relationships with existing clients, and doing so with greater client engagement. Second, these Q2 results are not just about top-line performance. They reflect our ability to invest in growth and expand margins, not through cost-cutting, but through operating leverage. The scale improvements powered by ABS, along with our restructuring program savings, created capacity to fund growth investments while still expanding margins by 80 basis points over last year, in line with our long-term model. Third, the top-line strength, coupled with the operating leverage, drove 19% adjusted EPS growth year over year, and we converted those earnings into 59% free cash flow growth in the quarter, a clear demonstration of the strength of our earnings power and capital position.

This performance reinforces our conviction in delivering double-digit free cash flow growth for the full year, and it gives us the flexibility to execute across all dimensions of our capital allocation strategy. We remain on track to meet our leverage objective, continue our disciplined middle market M&A strategy, and return $1 billion in capital to shareholders via share repurchases this year. Taken together, our first-half performance, 5% organic revenue growth and 8% adjusted EPS growth, reflects the strength and resilience of our business and financial model, and the discipline of our execution. In a macro environment that remains uncertain, we are delivering results by deepening client relationships and creating more value for clients through data insights and innovative capital solutions. We are driving growth through our investments and data capabilities, expanding margins through ABS, and converting earnings into strong free cash flow.

This gives us confidence in achieving our full-year 2025 guidance. Now turning to the second quarter results in the financial summary on slide five, you see that we delivered 6% organic revenue growth in the second quarter, and total revenue increased 11% to $4.2 billion. Adjusted operating margin was 28.2%, up 80 basis points for the quarter, in line with our expectations. This includes the impact from NFP as we lap the anniversary of the acquisition at the end of April, resulting in a more normalized margin profile going forward. Adjusted EPS was $3.49. Finally, free cash flow increased to $732 million, reflecting strong adjusted operating income growth and continued improvement in days sales outstanding. Let's get into the details of these results, starting with organic revenue growth on slide six. Organic revenue growth in Q2 2025 was in line with our mid-single-digit or greater guidance range.

Growth was broad-based with three of our four solution lines: commercial risk, reinsurance, and health, each delivering 6% organic revenue growth, reflecting strong new business performance and high retention. In commercial risk, the 6% organic revenue growth in Q2 reflected strong performance in our core P&C business, with meaningful contributions from both North America and EMEA, as well as strength in M&A services relative to prior year and double-digit growth in construction. Notably, construction and renewable energy projects remain key areas of focus for us, with activity levels continuing to be robust. In reinsurance, organic revenue growth was 6%, driven by double-digit growth in our insurance-linked securities business, where we continue to lead the market in cap bond placements, now totaling $50 billion outstanding. We saw double-digit growth in facultative placements in EMEA and Asia-Pacific, which helped offset softer April 1 property renewals, where rates declined 5%-20%.

Looking ahead, we continue to expect full-year organic revenue growth in line with our mid-single-digit or greater objective, supported by higher limits at July 1 renewals, continued momentum in international facultative placements, and strong demand for analytics from our strategy and technology group. Health solutions also delivered 6% growth in the quarter and benefited from continued strength in our core health and benefits business, especially across international markets. Growth was fueled by net new business and market dynamics that continue to drive rising healthcare costs. We also saw a strong contribution from NFP, most notably in executive benefits and pharmacy solutions, where demand remains elevated. Finally, wealth generated 3% organic revenue growth on top of 9% growth in the prior year period. The performance this quarter was driven by regulatory work across the United Kingdom and EMEA. We also saw a meaningful contribution from NFP asset inflows and market performance.

Let me take a moment now to walk through the components of our Q2 organic revenue growth on slide seven. As I shared at Investor Day, Aon has a consistent track record of generating new business, and that continued in Q2. In the quarter, new business powered organic revenue growth and contributed 11 points, with an equal contribution from both new clients and expansion with existing clients. Our investments in revenue-generating talent in high-growth areas like construction and energy are delivering measurable impact. Revenue-generating headcount is up 6% through the first half, and these colleagues are equipped with advanced data analytics and capabilities from ABS, enabling them to win more business. We continue to expect these investments to support sustainable organic revenue growth, with the 2024 cohort projected to contribute 30 to 35 basis points to full-year organic revenue growth.

Q2 2025 retention improved by one point year over year, driven by continued gains in commercial risk as we expand enterprise client leader coverage and deploy our risk capital analyzer. Net new business contributed 5 points to organic revenue growth in the quarter. Net market impact, which captures the impact of rate and exposure, contributed approximately one point to organic revenue growth, consistent with our 0-2 point estimated range. Reinsurance was down from rate declines and higher retentions, and rate pressure in commercial risk was offset with limit and coverage increases across our book. Health and wealth both benefited from positive net market impact, with rising healthcare costs and favorable asset performance supporting growth. One final point on revenue. Second quarter fiduciary investment income was $66 million in the quarter, down 12% versus the prior year. While average balances increased, lower interest rates more than offset that benefit.

On slide eight, adjusted operating income was up 14% year over year to $1.2 billion, and adjusted operating margin was up 80 basis points to 28.2%. This margin expansion reflects the impact of the four components that we highlighted when we provided full-year guidance: NFP, fiduciary investment income, restructuring, and operating leverage, all of which are in line with our expectations. While we absorbed a one-month margin headwind from NFP given the April 2024 closing, our margin continued to benefit from the scale improvement driven by ABS and the savings from our restructuring program. Specifically, restructuring savings totaled $35 million in the quarter, contributing approximately 83 basis points to adjusted operating margin. We remain on track to deliver $150 million in restructuring savings for the full year and are progressing well toward our goal of $350 million in run rate savings by 2026.

Given our strong progress in the first half of the year, we remain confident in our ability to drive full-year adjusted operating margin expansion of 80-90 basis points, consistent with our long-term model. Moving to interest, other income and taxes on slide nine, as we indicated last quarter, interest income was negligible in the second quarter and $31 million lower than last year when we earned interest on funds held ahead of the NFP acquisition. Interest expense of $212 million was lower by $13 million versus the prior year, primarily due to lower average debt balances. We expect interest expense to be approximately $210 million in Q3 2025. Other expense rose by $17 million year over year to $32 million, primarily due to the remeasurement of balance sheet items in non-functional currencies and higher non-cash pension expense.

We estimate Q3 2025 other expense to range between $25 million and $32 million. Finally, the Q2 tax rate was 16.5%, reflecting a favorable impact related to discrete items. While we expect variability in the quarterly rate, our year-to-date rate of 19.3% is in line with our expectations, and our full-year tax outlook remains unchanged at 19.5%-20.5%. Turning now to free cash flow on slide 10, we generated $732 million in free cash flow in the second quarter, up 59% year over year. On a year-to-date basis, free cash flow is up 13%. This growth reflects strong adjusted operating income, including contributions from NFP, and continued improvements in days sales outstanding. This free cash flow performance gives us the flexibility to execute across all dimensions of our capital allocation strategy. We continue to expect double-digit free cash flow growth in 2025.

Turning to capital allocation on the right side of the page, we remain focused on executing our disciplined and balanced capital allocation. We continue to make progress on deleveraging, lowering our leverage ratio to 3.4 times in the second quarter. We remain on track to achieve our target range of 2.8-3.0 times by the fourth quarter of 2025, consistent with the objective we set when we announced the NFP acquisition. We also remained active in M&A, continuing our targeted tuck-in acquisitions across priority areas, including middle market deals through NFP. Through June, NFP has closed eight acquisitions representing $20 million of EBITDA, with 80% of the EBITDA connected to P&C deals. Finally, we returned $411 million in capital to shareholders this quarter through the dividend and $250 million in share repurchases, keeping us on track for $1 billion in capital return through share repurchases for the full year.

Each of these actions, underpinned by strong free cash flow generation, reflects our disciplined capital allocation model in action: reducing leverage, investing in high-return growth, and returning capital to shareholders. I will conclude my prepared remarks on slide 11 with some thoughts on our financial objectives and 2025 guidance. Our second quarter results and our performance through the first half of 2025 reflect the strength of our financial model and our execution on our 3x3 plan. We are delivering sustainable organic revenue growth by investing in the capabilities that fuel growth: client-facing talent, differentiated analytics, and seamless client experience through ABS. Our organic revenue growth, combined with the initiatives we are executing across ABS to standardize operations and integrate platforms, is creating capacity to fund our growth investments while strengthening the foundation for ongoing margin expansion.

This combination is enhancing our earnings power and positioning us to deliver on our full-year commitments and long-term financial objectives. As a result, we are reaffirming our full-year guidance, including mid-single-digit or greater organic revenue growth, 80-90 basis points of margin expansion, including $260 million in cumulative annual savings from our Aon United restructuring initiative, strong earnings growth, and double-digit free cash flow growth in 2025, and a double-digit three-year CAGR for 2023-2026. We are executing with focus. We have momentum, and we remain confident in our ability to deliver long-term value for our shareholders. With that, let's jump into your questions. Donna, back to you. Thank you. The floor is now open for questions. If you would like to ask a question, please press Star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue.

Operator (participant)

You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the Star keys. We do ask that you please limit yourself to one question and one follow-up. Again, that's Star 1 to register a question at this time. Our first question this morning is coming from Jimmy Bhullar of JPMorgan. Please go ahead. Hey, good morning. First, just a question for Greg on the contribution to growth from capital markets activity and new hires. On new hires, I think Edmund had outlined at Investor Day that the contribution should pick up as you go through this year. Assuming that has not changed, but you could comment if it has.

Jimmy Bhullar (Equity Research Analyst)

On capital markets, I am not sure if you are seeing or expecting a greater impact in the third and the fourth quarters versus what you have seen in the first half, given that it looks like M&A IPO activity across the board is picking up in several industries. First of all, Jimmy, appreciate the questions. We will start with M&A services and then maybe go to talent when you are asking your second question. Listen, M&A services. You know this story well from our side.

Greg Case (President and CEO)

We love this space. We are unbelievably well positioned to win. We have been investing behind this capability because we know how important it is from a client standpoint, and we have been investing behind it in times when it was not doing so well. We have said to you before on calls, we are going to quit projecting, and we are going to talk to you about the rearview mirror. As this has impact, you will see it have impact. We have made progress in the quarter. Maybe describe it as better, but not back. You certainly see the pipelines pick up as you have heard the investment banks describe. There is a tremendous amount of dry powder still out there on the sidelines, and we made progress.

As Edmund described, it was a tailwind in the quarter, but literally the overall impact on our growth and the performance in the quarter was really very broad-based, as Edmund described. Generally, very positive, good prospects, but describe it as progress. Edmund, what else would you add before we go to talent? Yeah, just on the M&A point, Greg, just reiterating your point. It strengthened in Q1, Jimmy, and in Q2. That was modest growing over a low base. There's modest growth in our second-half outlook for M&A, and we still expect to maintain our mid-single-digit growth levels despite that. If it comes in stronger, then that'll be a tailwind for us. The point I want to emphasize is the point that Greg made about broad-based growth. M&A falls into our commercial risk segment, which was at 6% for the quarter. Again, right in line with our expectations.

Edmund Reese (CFO)

We weren't surprised by that. That was strength driven by what I mentioned in my prepared remarks, our core P&C business in North America. Double-digit growth in construction. That means the priority hires, the next part of your question, is contributing right in line with our expectations. M&A was a tailwind, but not the key driver. I'll also point out in construction, our international markets, particularly in EMEA and LATAM. There, the growth was driven by new business and the impact of us hiring in those markets. The growth was broad-based across our different solution lines coming from new business and new hires. On your second question, Greg, do you want to—should I start there? On the second question, you're right. I think the first thing you heard me say in the remark, I'd point out is that through six months, we're up 6% in revenue-generating hires.

Right in line with the 4-8% that we communicated at Investor Day. That is strong growth in the priority areas. We saw growth in energy. Again, I'll mention double-digit growth in construction. Those are areas that we think are outpacing GDP growth, but we're doubling down on. Contribution at 11 points of contribution from new business to our organic revenue growth. That's broad-based, but there's a significant component of that as we start to see the new hires pick up in their contribution. We still remain confident in what we said at Investor Day of 30-35 basis points of contribution from the 2024 cohort of new hires. The last point I'll make on it is that we're just going to stay focused on this.

We're a growth company, so we'll remain committed to investing in talent, in the tools that we talked about on the calls, and the capabilities through ABS as well. Thanks. Maybe just a question on your preferred uses of free cash flow. You mentioned deleveraging as you had outlined with the NFP deal. Maybe comment on your interest in large M&A. It seems like the antitrust environment's better than it was before, and some of your peers have done larger deals since you did the NFP acquisition. Just your interest in large-scale M&A as a use of capital. Yeah. Maybe I'll make a few points about where we are in our position, which is strength, a position of strength. I'll turn it to Greg to talk a little bit broader about the environment.

The answer to this question, which is the free cash flow growth, 59% in the quarter, 13% year-to-date, coming from our operating income, coming from NFP, coming from integration and transaction costs winding down, as we called out at Investor Day. The confidence in double-digit free cash flow is very high. That means that we are in a position of strength with flexibility. On that point about flexibility, the priority, of course, is getting that leverage ratio down. We're well on track to be able to do that. We're paying the dividend. We will continue to evaluate assets that meet our strategic and financial criteria. We're very diligent on ensuring that our M&A decisions are accretive to returns. I put up a slide during Investor Day that said 12% revenue growth after one year of ownership, over 20% of IRR, and industry-leading ROIC.

My point is that we are in a position of strength with the free cash flow. We have the flexibility. We're going to use the right criteria to evaluate as we continue to invest for growth. Greg, maybe a little bit on the environment. Yeah. Listen, you've captured it very well, Edmund. Jimmy, you get the point here. This is an underlying foundation that's driven our capital allocation decisions for a long time, just fully reinforced by Edmund. This is operating on strength with flexibility. Go back in time. Return on invested capital, cash-on-cash return, true evaluation across the spectrum. Also remember, we're buying and selling, right? We are managing capital in a way in which we are absolutely focused on it. We'll take steps to focus the portfolio if it's going to be helpful and add to the portfolio in any way it's going to support us as well.

Greg Case (President and CEO)

From dividend to buyback to acquisition in every way, shape, or form. I appreciate the question, but we're excited about the potential here. Thank you. Thank you. The next question is coming from Elyse Greenspan of Wells Fargo. Please go ahead. Hi, thanks. Good morning. My first question is also on the M&A transactional book. I was just wondering, is it overly any geography or industry vertical, or is it pretty diversified? Then directionally, is the margin better or worse than the core P&C margin within the commercial risk segment? Appreciate the question, Elyse. Listen, we're happy to talk about M&A services all day long. Just love the questions. For us, remember, we have truly invested in world-class capability and content here. We continue to do it when it wasn't as robust. The demand wasn't as robust for all the reasons that we all know.

We described at the time that we have expanded our capability. We expanded it both geographically as well as beyond just sort of the classic PE focus. It really is to the corporate world too. If you think about sort of the uses of M&A services, they've predominantly been directed toward the PE world, but equally compelling in the context of the overall corporate world. From our standpoint, what we've got is broad-based capability and what we believe will be, with time, very broad-based demand across the world. Now even broader in terms of sort of how it's going to be applied. Again, we're excited about the potential. We've always asked Ben. Nothing's changed there. As Edmund and I both tried to describe, better, not back, right?

There's a long way to go here with a lot of dry powder, and we're going to continue to see it evolve over time. On the margin question, Edmund, can you comment on that? Yeah. I think first, on the first question, your operative word there is broad-based. Elise, the growth is a tailwind, but modest. We saw that growth across all of our regions. EMEA was strong. Asia-Pacific was strong, just like US as well in the M&A space. On the margin, I think your question is about margins in the components of commercial risk versus the other areas. The key thing for us is that commercial risk has slightly higher margins, but the margins are in line. I don't pay too much attention to a particular—we're an annual company, so the margin in a particular quarter isn't where I'd focus.

Edmund Reese (CFO)

Most importantly, the key area of focus should be the expansion in both margins on the commercial risk side and on the human capital side. We're seeing that expansion across both the segments because it's driven by the operating leverage and the scale improvements that we get through ABS. We're seeing it across our solutions. Thanks. My second question, I was hoping you could spend a little bit more time on what drove the pretty strong free cash flow growth in the quarter. I know the full-year guide is for $300 million from NFP free cash flow. Where do we sit through the first half of the year? Yeah. I caught that. I mean, again, you're answering the question within the question there. Those are the drivers.

I think there are four areas to keep your eyes on when you think about our free cash flow growth and how we get to double-digit. One is the operating income growth within that NFP. Both of those items were contributing for us in the quarter. We feel very good about the $300 million in 2025 free cash flow contribution from NFP on that question. The second area for us is the continued working capital and improvements, and in particular, days sales outstanding. I called that out in the prepared remarks. We continue to focus on that by region within our procurement teams. We continue to see benefits from that as well. The third area that I'd focus on is restructuring, the Aon United Restructuring Program. That continues to be a degradation of free cash flow as we go through 2026 in line with our plans on that.

The benefit that we saw in addition to those three items in the quarter was through the lower NFP transaction and integration costs, just as I said at Investor Day. Operating income, including NFP, the working capital improvements, and the lower transaction and integration costs from NFP, those are the drivers for 13% year-to-date. Continued strength in those drivers is what will have us on track for double digits in 2025. At least I just want to—I want to point here, an important one, because you touched on the keynote for us, which is free cash flow and free cash flow growth. Edmund just described very well kind of what's happening in the year, what's happening year-to-date, all exactly on point. Step back. Remember, we are all about revenue and revenue enhancement and then the translation of free cash flow from revenue, period.

We look at that in every angle, every shape you can imagine. You look at our history, we've done double-digit free cash flow growth for a long period of time. We add the 3x3 plan. The 3x3 plan with Aon Business Services is, again, it's a leverage to revenue. It's a leverage on capability, driving revenue. You're seeing that opportunity. It is a leverage to operating improvement, operating efficiency. For us, we did double-digit without Aon Business Services. Now Aon Business Services is continuing to come fully online. What we're now underscoring is reinforcing our ability to deliver that. You're seeing that come to fruition. For us, we absolutely want you to stay focused on free cash flow. We are as well. The opportunity here for us, we think, is substantial, which is why we're reinforcing guidance around this. Understand the mechanics of this isn't about just a 2025 result.

It's about 2025, 2026, and ongoing well beyond the 3x3 plan period. Thank you. Thank you. The next question is coming from Andrew Kligerman of TD Cowan. Please go ahead. Hey, good morning. Back when you closed on the NFP deal about a year, a year-plus, the talk was of the expectation of generating about $175 million in energy coupled with about $60 million in cost synergies. I think, Edmund, you mentioned that this year you're on track for $80 million in revenue synergies. Looking out to 2026, how are you progressing there? What can we expect along these numbers? Any specific numbers you could provide around these metrics as we look to the incremental upside in 2026? Andrew, thanks for the question. Maybe just a bit of context around NFP overall and the progress, because then it sets up.

Greg Case (President and CEO)

The specifics and sort of how they've continued to strengthen and evolve, which Edmund can take us through. Listen, step back. We talked about this on Investor Day. High expectations as NFP came into the Aon world, and they have been exceeded. It's truly been terrific for us to sort of get a chance to work with this team, support them, and they support Aon. It's actually been a great combination. You have seen this show up on the revenue side and the organic revenue side and what we've been able to do, as well as on the operating side, which showed up. Sort of in the core of it, is showing up throughout the overall year. For us, this is exactly what we hoped it would be, the platform. The platform also upon which we can add the programmatic M&A that Edmund talked about as well.

Really, a lot of this driven, as you think about NFP overall, on the idea of independent and connected. Independent and connected has made a huge difference as we think about adding capability to NFP from a producer front, but also from an M&A front, us more attractive to others who want to be part of the overall Aon world. I just want to set context as you think about sort of NFP and the progress we've made. Against that, absolutely, you're seeing it show up in the outcome. Maybe, Edmund, a little comment on that. Yeah. Andrew, on this question, the first thing that Greg and I both highlight is producer retention. Because without that, you're not going to have any of the revenue synergies come through. It's better than it was pre-acquisition.

Edmund Reese (CFO)

In 2025, we continue to be as strong as we were in 2024 on producer retention as well. That's driven by the independent and connected strategy that Greg was just talking about. First step is minimizing any revenue leakage. To date, you're right with the numbers that you mentioned, $80 million in 2025, $175 million in synergies through 2026. To date, we've bounced several million in new business from joint activity across the business units. As we think about specific areas that we're focused on, as we look at the pipeline of what we've accomplished to date and what's going to help us meet that $80 million number and $175 million number, maybe highlight two or three things for you. One is transitioning from third-party wholesale to Aon expertise capability that we have.

That was exactly what we thought when we thought about opening up the Aon store to the NFP population. Two is using our Aon Global Broking Center for international placements and specialized placements. That has been an area of growth and strength that NFP is taking advantage of and contributing to the synergies thus far. Then we have middle market panels in place in places like Marine and Terrorism and Builders Risk, places that are even certainly relevant in the macro environment that we're in right now. Those are areas that we're focused on to be able to meet the $80 million commitment in 2025 and $175 million in 2026, which we continue to be confident in. Got it. Just a second question is around reinsurance solutions. You talked about double-digit increases in ILS and facultative placements. How should we think about the dynamic with Treaty?

Andrew Kligerman (Managing Director)

Is that kind of taking from Treaty, or do you see kind of an uplift in both? How should we think about that dynamic between the two product areas, ILS and Treaty? Andrew, love the question. We'd suggest you step back a little bit and think about this isn't really from a product orientation. It's from a client orientation. I mean, we're literally stepping in and asking the question, how can we help clients both defend the house, think about their balance sheet and what they're doing, but also grow it and actually build capability? For us, whether Treaty, facultative, ILS, all of these things sort of come into play as you think about helping a client do that. In many respects, not competing, but complementary. For us, it's really been a great story from the reinsured standpoint.

Greg Case (President and CEO)

We've just got such a remarkable capability, remarkable global capability that continues to get stronger. Now with the 3x3 plan and the investment behind it in analytics, absolutely tremendous. We highlighted, I highlighted one of the examples that we came up with, the Surge Stop Loss opportunity. This is a net new ad that comes into the fray that helps us actually be better from a reinsurance standpoint. Andrew, step back and understand. This capability as part of risk capital is then an amplifier, a big amplifier. You've got reinsurance in and of itself, tremendously positive, continuing to progress with increasing demand, great opportunity. Within risk capital, now we're talking about how to take this capability and really embed it into the commercial risk decision process as well. Very complementary.

Now we're talking about the largest companies in the world, trillion-dollar balance sheets, asking the question around, how do I understand volatility? The answer to that is not a product. It's not an individual solution line. It is global Aon. You think about just ILS and what we've done for commercial companies emanating from reinsurance. In 2021, we did basically no deals. 2020, nothing. In 2024, we did 109. Year-to-date, 2025, we're already at roughly 100. This is truly remarkable in terms of what the opportunity is here. For us, this is the wheelhouse in terms of sort of net new demand as it evolves over time that we're going after. Pretty excited about the opportunities here as they connect reinsurance and commercial risk. Same story on the commercial risk side we can talk about as well. Thanks. Very helpful. Thank you.

Operator (participant)

The next question is coming from Rob Cox of Goldman Sachs. Please go ahead. Hey, thanks. Good morning. Yeah, just a question first on talent. The revenue-generating headcount seems like it's up 6% year-to-date, and this push has been successful. I'm curious. Has this changed your mind at all about the sort of run-rate future investments in talent? And is this 4-8% increase annually sort of the right level to think about going forward? Maybe, Rob, if I could, I'm going to start with an overview, but then really dig in on this. This talent question is important. It really is part of the conversation we had on the Investor Day around adding content and capability. I really want to touch on this for a bit. Look, when we think about talent, remember, the mission of our firm is client-obsessed.

Greg Case (President and CEO)

I mean, it literally is helping clients make better decisions and get to better outcomes. Because of that, not because for financial leverage and not because we're going to move people around, our industry does a lot of that, we're adding talent to deliver an outcome. That's why we focused on priority areas: construction, energy, health, and our priority areas. Remember, our commitment is add talent. Better capability, but we've got to help them be better at Aon. Somebody coming over to Aon without the analyzers is not a net ad. Somebody coming without the improvements in service and what we do with certs, etc., is not an ad. For us, Rob, this is talent in the right areas, and then it's reinforced by Aon, by what we do, by Aon Business Services.

We basically made the point, and Edmund had made it well on Investor Day, and I'd love him to comment on it more now, this is about continuous improvement. It's continuous improvement in terms of what we're trying to do on their behalf to support clients, but also continuous investment. The machine we're talking about here is a machine that drives top line, improves operating performance, but also invests back into the business on an ongoing basis. For us, we're going to continuously look at this. We're going to evaluate it. We're going to make the right calls. By the way, this is capital allocation. We're going to make the right calls in terms of what we're trying to do. We see more and more potential to bring talent in, particularly because we can amplify the talent that comes in. That's also why they come.

They're excited to do something to wow a client, to do something with their client they haven't been able to do before. That's what makes us attractive, and that's the commitment we have to them. I want to offer that view at a macro level, and then, Edmund, talk about where we are in the year and what we're expecting over the plan period. I'll start by emphasizing your point, Greg. This is about meeting client need, meeting client need. If you do that, then you drive—we're very specific about this word, Rob—sustainable organic revenue growth. If you meet the client need, then you can drive this sustainable organic revenue growth. You do that by making these hires. We have the capacity to make the hires, primarily because of the Aon Business Services, ABS, and the scale improvements that we get there.

Edmund Reese (CFO)

I'll refer you back to the slides at Investor Day on margin expansion and investment and growth, where we drive this margin expansion through Aon Business Services. We get some benefit from expense discipline, and then we invest 40-60 basis points in revenue-generating hires and other capabilities. The objective there is to meet our near-term objectives: double-digit free cash flow growth in the current year here, and invest for ongoing sustainable top-line growth. If we can get more from the scale improvements, then we'll invest more. If we can deliver in the current year and are outperforming, then we'll invest more. If we find the investments in the right areas, areas that we think are growth. It's not about quantity. We keep saying here it's about quality, talent in the growth area.

That is the model for us, to create the capacity to both grow and expand margins that allow us to hit our immediate near-term financial objectives, but have sustainable growth in the long term as well. If we can create more opportunity to invest more, then we're going to do that with that in mind. That's great. Thanks for all the color there. If I could just follow up on maybe a broader question on the economy. Broad strokes, what are you hearing from clients, and how are you thinking about growth and exposures in the back half of the year? Listen, Rob, again, back to kind of what we talked about in the Investor Day context. Look, these four megatrends we've talked about—trade, technology, weather, workforce—they just continue to be reinforced.

Greg Case (President and CEO)

As we said at the Investor Day, we were talking about trade a year before the liberation day, and now it's been intensified massively. We're seeing that. I would observe, though, the 3x3 plan and the investments we're making, again, not something we created. It's something we listened to clients and we responded to. We just responded to at an industrial strength level. It is true. There is more volatility. We've been talking about that for a decade, more risk. There's a need for real capability to respond to that. If you think about it, there's no denying the complexity, no denying the volatility. Unmanaged, by the way, what happens? Complexity creates uncertainty and ambiguity, and it slows everything down. Action stops. Investment stops. That's what everybody's worried about. Look, we think about it as complexity, again, no denying it.

Edmund Reese (CFO)

If you can help a client understand options, real options, and then you've got solutions behind the options, they see advantage and they see speed. Be clear, our clients want to take action. If the pandemic taught us nothing else, it was inaction's not a great outcome. Hope's not a strategy. They came to realize that. They're looking for actions. I'm just trying to think. One example I'll share with you, because it resonated very strongly for me. I've been having ongoing conversations we have across the firm with the CEO of one of the largest builders in the world. We've been talking about, and this is over the last three months, and they've been talking about their portfolio of major infrastructure projects. These are mega around the world, and they're open for bid.

They're massive, as I said, but they're also complex, and the geography is complex, and the geopolitics are complex. Three months ago, they're talking about a pullback. I mean, literally, maybe a no bid on a number of them. They're just taking a huge reserve position. We spent time over the last three months on a set of analytics that helped them understand ways to reduce aspects of volatility. I mean, we're not going to change the operating underlying aspects, but all things that surround those projects. Now they've got a brand new prioritization around what they're going to go after, real offense. In their mind, they've got great conviction around the subset of these they think is a greater opportunity.

What I'm trying to highlight for you is all that you read, all that's out there is real, but understand clients want to take action, and they want the content to be able to take action with conviction. That's us. This is the analyzers. This is the capability that we bring to the table. This is the matching of capital with risk and matching beyond just insurance capital, but really pension capital and sovereign fund capital and PE capital. It really is, in that context, for us an opportunity to help clients take a step ahead with conviction, and that's real opportunity. Recognizing the complexity that's out there. Hopefully that wasn't too much, but it gives you a sense on sort of literally what's happening in the market day to day. That's great. Thanks for the answers. Thank you. The next question is coming from David Motemaden of Evercore ISI.

Operator (participant)

Please go ahead. Hey, thanks. Good morning. Edmund, I was wondering if you could just size the tailwind to organic growth from the M&A services for both the total company and then specifically within commercial risk, and then maybe help us think about it. I understand it's not back yet, but if it were back, how much of a contribution could it have? Yeah, David, thanks for the question. I mean, there certainly is a ton of emphasis on M&A right now. I'd prefer to stay focused on what the drivers are today here. M&A is providing a tailwind for you. I've said before, growing off of the base that we have for M&A right now. We have objectives of mid-single digit or greater. You would need M&A to be multiples of that.

Edmund Reese (CFO)

You would need it to be four, five times that before it becomes a significant contribution to the overall organic growth rate that we have. The items that are driving it right now really is the core P&C business, the investment hires that we're making, the double-digit growth in construction, those investment hires driving new business right now. We're going to continue to be focused on new business and retention. The other big thing in commercial risk, we talked about retention being up one point year over year. This is an opportunity to even call it our North American. Retention in commercial risk, which was up substantially given what we're doing with our priority accounts. With our premier accounts, what we're doing in terms of expanding coverage. M&A, I get the focus on that right now. It's a bit of a tailwind.

I think our outlook is for it to be modest in the second half of the year. If it comes in higher, then that gives us more confidence in being at the mid-single digit or greater levels in our balance. We're not dependent on that. We are more focused on recurring organic revenue growth. We'll maintain our fair share, as Greg said earlier, of M&A services, particularly with PE, and we're focusing on expanding with corporates, but our focus is on recurring revenue growth, and those are the drivers. David, we're not trying to hedge here at all, but understand M&A services is intertwined. It connects with all of our aspects of our business. It isn't just a transaction liability placement. It really is around a run-up discussion, or it's around a whole series of other things related to the P&L. It's very interconnected. I think Edmund characterized it perfectly.

Greg Case (President and CEO)

You'll see it play out as it plays out, and it looks like it may be a little more positive, but again, very connected to what we do across the firm. That's why we're not going to really break it out as an individual piece, because it's really very supported by colleagues around the firm. Understood. Thank you for that. I totally understand. Just a follow-up on the 6% increase in the revenue-generating roles through the first half. Already at halfway through the full year, the midpoint of the full year goal. Maybe you could just talk about the talent pipeline and if you think there's maybe the potential to get above that 8% growth in revenue-generating roles that you guys had targeted for this year. Listen, Edmund described it very, very well. We're making calls on capability to help serve and support our clients.

We're identifying capability to come in in these priority areas and with a game plan on how they can actually come in with high conviction and excitement about how they can do more than they've done before, not the same, more than they've done before. When we see those opportunities, we will take advantage of them. This is not a specific target. Edmund's describing exactly kind of what's come about, and we anticipate just continuing to maintain momentum. The analyzers matter. What we're doing on the client experience we described on Investor Day, next-generation client experience, as the world understands what that really means at a micro level sitting across the table from a client, we become more—it's more interesting.

Edmund Reese (CFO)

When you can actually help a client understand they don't have to actually deal with certificate proof of insurance because we've actually digitized it and created an outcome with AI that literally makes it real-time that a client could do themselves. They go, "Wow, I get to talk to my client about being able to do that. They couldn't have done that before." These capabilities matter, and people see that, and producers see that, and they want to be part of Aon, and we invite that, and we're going to nourish that as best we can. It'll play out as it plays out. We'll push it as the opportunity is there versus just pushing it to push it. Great. Thank you. Thank you. Our final question today is coming from Meyer Shields of KBW. Please go ahead. Okay. Thanks so much and good morning.

Meyer Shields (Managing Director)

I was hoping to get an update on how sensitive clients of different sizes are to elevated social inflation or legal risk in the U.S. I know on the insurance side, obviously, it's a major concern, but I'm wondering whether it's penetrating the broader consciousness. Meyer, thanks for the question. Listen, again, client orientation. Yes, it penetrates everywhere. Everyone reads, and clients understand that in many respects, this is focused ultimately on them in terms of sort of what it really means. Absolutely focused on them. They're concerned about it. Therefore, we're concerned about it. You saw in October of last year the first to basically say, "We're not going to support this. Because it really doesn't support our clients," period. We just said no. Especially focused on the North American and the U.S. theater. Yes, it's an area of concern, and we're taking action to explicitly not support it.

Edmund Reese (CFO)

We made that public. Others have now joined the fray, which is terrific. We believe it's the right answer. Yes, it's absolutely a known outcome across the board. Some more acute than others, depending on the industry you're in and the size. Make no mistake, it's a big deal. Okay. Fantastic. That's very helpful. I want to go back to the talent question just one more time because we've gone through, I think, these many waves in the industry where Company X is hiring and so on. I think it's great. I'm wondering, what's Aon doing to not so much recruit talent as to train it from scratch or to grow it from scratch? Myer, this is—we would love to spend any and all time with you on this. This is what I was trying to allude to before, or highlight before with Edmund as well. This is it.

Moving bodies around doesn't matter. I mean, how do you get better choice when you just move people around? You bring colleagues in, and by the way, they want this. They drive this. This is a colleague. I mean, this is all about people. They want more capability. They want a better answer. They want a better—I mean, the example I was giving before on the construction company, this is all about they got some insight they didn't have before, provided by our colleagues, provided by a producer. This is taking someone and helping them be better. They're phenomenal. They're driving it. Now with the seven analyzers, they're better. They had a property analyzer embedded with reinsurance content.

Literally, a commercial company making decisions about global property placement at a structure level with literally the information that was there from reinsurance driven off of impact forecasting is like, "Wow." A producer gets to see that they're better. Broker Copilot, literally, we're capturing information never been captured before in a comparable way, ingested so you can actually compare it real-time. Our colleagues get a chance to see that, and they're like, "Wow." For us, if we can help a producer be better in real-time with a client and then with solutions and then as they interact with the market, this is a big deal. On the insurance side, if we can help them in the reinsurance market, do the same. This is a big deal. For us, talent is about better client solutions. Talent has got to be about better client solutions.

If we fall short of that, we don't succeed because our clients aren't better off. For us, we're not trying to opine on what everybody else does. You're absolutely right. It's been tried and true. It's important for us that you understand we are different. We're not saying we're better, although we like our chances there, but we are absolutely different in how we're approaching the market and approaching talent. And it's resonating. And it's resonating and independent and connected when you talk about connected with NFP, and it's resonating in Aon broadly in terms of how we're bringing talent in. So hopefully that's a little bit of color commentary on how we're thinking about it. Very different. That is very helpful. Thanks so much. Thank you. At this time, I'd like to turn the floor back over to Mr. Case for closing comments.

Just wanted to say thanks, everyone, for joining, and look forward to talking to you next quarter. Ladies and gentlemen, this concludes today's event. You may disconnect your lines and log off at this time and enjoy the rest of your day.