Q3 2025 Earnings Call Transcript

Good morning, and thank you for holding. Welcome to Aon plc's Third Quarter 2025 Conference Call. [Operator Instructions] 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 can 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 filings, all of which are available on our website. Now it is my pleasure to turn the call over to Greg Case, President and CEO of Aon plc.

Thank you, and good morning, and welcome to our third quarter earnings call. I'm joined today by Edmund Reese, our CFO. The financial presentation, which Edmund will reference in his remarks is posted on our website. To begin today, we want to recognize the great trauma and suffering resulting from Hurricane Melissa.

We're thinking about everyone affected by this terrible catastrophe, and we feel very, very humble and hopeful that the work Aon undertook with the World Bank to arrange a cap bond for the government of Jamaica will help accelerate and support recovery. Turning now to Aon. Our third quarter results reflect another quarter defined by continued acceleration of our Aon United strategy, great progress executing our 3x3 Plan and financial model and ongoing momentum as we head into the final months of the year. Our focus on execution is translating into value delivery to our clients, while at the same time, producing results for our firm and strong financial performance.

We're winning more in the core by deepening relationships with existing clients through data-led solutions, capturing demand in existing markets by developing new capabilities for emerging risks and creating demand in new categories by innovating unique capital solutions. And we're strengthening our clients' insurance programs to ensure they're positioned well for the future with enhanced coverage and limits. Let's start with a look at our third quarter highlights. We delivered another strong quarter of financial results, highlighted by 7% organic revenue growth, a 26.3% adjusted operating margin and 12% adjusted EPS growth, which keeps us on track to achieve our full year objectives.

Our continued success in winning new business and deepening client relationships reflects the strength of our risk capital and human capital capabilities powered by ABS. Simply put, our analytic capabilities enable smarter and faster decisions for clients, which when coupled with our advisory expertise, helps clients capture greater opportunity. And while any firm can point to client wins, 2 highlights from this quarter truly demonstrate the impact of our differentiated strategy. The first example demonstrates how our advanced analytic capabilities were critical in securing our appointment as the captive insurance partner for a leading global logistics company, replacing a competitor relationship that spanned decades.

Our ability to deliver global expertise with local leadership provided the client with relevant insights into captive management and their risk capital structure, making Aon the clear choice. In the second example, by demonstrating our distinctive client service and enterprise mindset to the enterprise client group, we not only retained but expanded our benefits work with a long-standing financial services client in an intensely competitive process. We leverage deep industry knowledge in governance, risk management and employee experience. And this resulted in securing global benefits across new and existing geographies, U.S.

H&B and total benefits administration. Our proactive approach, combining innovation, analytics and advisory continues to deliver measurable impact and position us for sustained success as our solutions have never been more relevant for clients. Our latest 2025 Global Risk Management Survey revealed a significant shift in the risk landscape and how decision-makers are thinking about risk. Trade and geopolitical volatility entered the top 10 global risk for the first time in nearly 2 decades, reflecting growing global uncertainty.

At the same time, climate risk and natural disasters also reached their highest ever rankings, underscoring the need for resilience in a world where severe weather events are driving up costs. And workforce-related risks continue to have a growing impact on how employers manage affordability, access and productivity. In addition, advancements in AI are surging demand for cloud infrastructure and are fueling unprecedented investment in data center construction with CapEx estimated to exceed $2 trillion globally over the next several years. These technological developments are not only reshaping physical infrastructure but also amplifying cyber and operational risk.

Active risk management in this area has become a strategic necessity and traditional approaches alone aren't sufficient to cover this risk. With connected risk capital and human capital capabilities, we're truly uniquely positioned to guide clients through a complex environment, access capital, unlock value and build resilience. As we review our performance this quarter, several strategic milestones demonstrate progress on our 3x3 Plan. These achievements are the direct result of our team's dedication, collaboration and focus on advancing priorities.

First, talent remains a significant driver of sustained growth and the competitive environment for attracting and retaining top performance is as intense as ever. No company is immune, which makes it essential to stay focused and deliberate in our approach. In this environment, our platform is a unique advantage in attracting talent and helping client-facing talent win more business and retain clients, especially in priority areas like construction, energy and health. Revenue-generating talent is up 6% net year-to-date, reflecting our strong position and differentiated capabilities.

We have a great team, and we remain focused on continuing to strengthen it. Second, our enhanced capital strength gives us greater flexibility to execute our capital allocation strategy with discipline and precision. We divested the NFP Wealth business, an asset better suited to an owner prepared to make the capital investment required for long-term growth. At the same time, we remain highly committed to our core wealth and retirement offerings, which represent key components of our human capital value proposition.

Also during the quarter, NFP closed more than $10 million in acquired EBITDA as part of programmatic M&A. We have a great pipeline of high-return middle market opportunities, and our improved capital position reinforces our commitment to long-term strategic investment and shareholder returns. And finally, equipped with better data and analytics built from years of investment, we're mobilizing capital into the industry, particularly to address the rapid expansion of data center construction driven by AI and cloud infrastructure adoption. As highlighted earlier, the opportunity here is monumental.

Data center CapEx increased 50% in 2024 and is expected to increase significantly over the next several years as trillions of dollars of CapEx go into the construction of these facilities. Near term, we estimate data center demand could generate over $10 billion in new premium volume in 2026 alone. Our globally aligned risk capital and human capital teams are helping clients navigate this transformation and support stakeholders across the value chain from technology companies to contractors and operators to capital providers, each with unique insurance needs given their role in the data center development.

While still early days, we're excited by the specific accomplishments that showcase our ability to help clients navigate this transformational opportunity. We recently became the risk partner for a leading global engineering-focused insurer with a mission to work with them to build significantly greater level of insurance capacity. This work complements the launch of our data center life cycle insurance program, a proprietary multiline insurance facility that consolidates coverage for construction, cargo, cyber and operational exposures and offers clients end-to-end risk management and insurance solutions.

We're also working to support resilient design and engineering from the outset of these projects to optimize the industry's ability to provide the limits necessary for hyperscaler, data center development and management of accumulation risk. Another example of how our global distribution analytics and expertise in both traditional and alternative risk transfer is already delivering results is a recent client win where we placed nearly $30 billion in coverage for a top global hyperscaler data center developer for operational data centers and data centers under construction. And this is just the beginning.

Overall, we accomplished a lot this quarter and there's a lot to be energized by going forward. Our results and the momentum we have going into the final months of the year give us confidence in reaffirming our 2025 guidance. Let me conclude with 2 points. First, our Aon United strategy accelerated through the 3x3 Plan and the strength of our financial model are generating strong results today and building momentum for future success.

Our unique capabilities and integrated solutions have never been more relevant to clients as we help them reduce volatility, protect their assets and grow their businesses. We're attracting exceptional talent to strengthen our great team, delivering innovative new solutions with unmatched data and insights and building and deepening client relationships. And we're winning more in core markets, capturing new demand in existing markets and creating new demand in new categories. And finally, and most important, to our over 60,000 colleagues around the world, thank you.

Thank you for your commitment to our clients, to each other and to our Aon United strategy. Your dedication is the driving force of our firm. Now let me turn the call over to Edmund for his reflections on the quarter and outlook for the year. Edmund?

Thank you, Greg, and good morning, everyone. I'm excited to be here to discuss our third quarter results, which marked another quarter of disciplined execution on our 3x3 Plan and financial model. To frame our discussion, let me highlight the most important factors shaping our third quarter performance. First, our Q3 performance demonstrates continued momentum across the key drivers of sustainable top line growth.

Our investment in revenue-generating talent enhanced by ABS and our continued expansion in the middle market is translating into strong organic growth. Organic revenue growth of 7% in Q3 serves as another proof point in our ability to execute on each of these drivers, keeping us in line with or ahead of industry performance. Second, we continue to deliver scale improvements and operating leverage through ABS while also investing in talent and capabilities that deepen client engagement and drive new business. We again delivered in Q3, expanding margins over 100 basis points and increasing our revenue-generating hires by 6%.

Third, our enhanced earnings power, disciplined portfolio management and strong free cash flow generation, up 13% in the quarter have strengthened our capital position. Through 3 quarters in 2025, we have reduced debt and remain on track to achieve our leverage objectives, closed $32 million in EBITDA from middle market acquisition and returned $1.2 billion in capital to shareholders through dividends and share repurchases. Our strong capital position empowers us to pursue high-return inorganic investments, further accelerating and supplementing our organic growth momentum. Collectively, these 3 components momentum on the growth drivers, accelerated scale benefits through ABS and a robust capital position are delivering growth today and setting the foundation for future performance.

We continue to invest in capabilities and innovate capital solutions that create even greater value for our clients. And this gives us confidence not only in achieving our 2025 guidance, but also in the upside potential of sustaining top line growth and delivering double-digit free cash flow beyond 2025. Turning to the quarter's results. Organic revenue growth was 7% and total revenue increased 7% year-over-year to $4 billion. Adjusted operating margin expanded by 170 basis points over last year and reached 26.3%.

Adjusted EPS was $3.05. And finally, free cash flow increased 13%. Let's get into the details of these results, starting with organic revenue growth on Slide 6. Organic revenue growth was 7% in the quarter, in line with our mid-single-digit or greater guidance range. Growth was broad-based, 5% or better in each solution line with 2 of our solution lines delivering 7% or greater, a strong result achieved despite pricing pressure in certain products and geographies, underscoring the contribution from new business and continued high retention. In Commercial Risk, 7% organic revenue growth reflected strong performance in our core P&C business globally, including double-digit growth in the U.S. with meaningful contribution from the middle market through NFP and continued strength in EMEA.

M&A services continued to grow at a double-digit level, and its contribution provided an incremental lift. Construction also delivered double-digit growth, driven by demand from large-scale global infrastructure projects, including data center builds for major tech companies, reinforcing this category as a strategic priority. Reinsurance delivered 8% growth driven by treaty placements and double-digit growth in facultative placements and the Strategy and Technology Group. Insurance-linked securities also had significant growth, but off a smaller baseline.

While July 1 treaty property renewal rates were softer, this was balanced by higher limits and ongoing strength in international facultative markets, especially in EMEA. Demand for STG analytics remained high, underscoring our platform's increasing importance in supporting clients as they navigate volatility and match capital to risk. Health Solutions grew 6% this quarter, benefiting from data analytics-driven sales in our talent business and new business in our core health and benefits offerings across the U.S. and EMEA. As Greg mentioned, we continue to leverage our analytics and advisory capabilities to support employers as they navigate rising health care costs and achieve better outcomes for their workforces.

And finally, Wealth generated 5% growth, the performance reflects strength in advisory work in the U.K. and EMEA related to ongoing regulatory change, partially offset by softer advisory demand in the U.S. Additionally, the NFP contribution was meaningful, driven by asset inflows and market performance. Importantly, for modeling purposes, I will add that we expect Wealth growth in Q4 to be 1% to 2%, impacted by delays in U.S. advisory work and the sale of the faster-growing NFP Wealth business, which closed yesterday. Let me take a moment to walk through the key components of our Q3 organic revenue growth on Slide 7. In Q3, we extended our consistent track record of strong new business generation to drive organic growth.

For the second consecutive quarter, new business contributed 11 points to organic revenue growth with balanced contributions from both expansion with existing clients and new client wins. Our investments in revenue-generating talent, particularly in high-growth sectors like construction and energy continue to deliver measurable impact. We remain proactive and on the front foot in attracting top talent. Our revenue-generating hires are up 6% year-to-date.

Importantly, we're already seeing these new colleagues make contributions to new business growth. As the 2024 hiring cohort continues to ramp, we are confident this group will contribute 30 to 35 basis points to full year organic revenue growth, leveraging advanced analytics and client engagement tools through Aon Business Services. The 11-point contribution from new business this quarter underscores the effectiveness of our investment in client-facing talent, and we expect continued momentum as the 2024 cohort seasons and the 2025 hires continue to onboard. Q3 '25 retention remains strong year-over-year, reflecting the continued strength and stability of our client relationships, supported by investments in enhanced service delivery, innovative capabilities and Aon client leadership.

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 just over 1 point to organic revenue growth, consistent with our 0 to 2-point estimated range. Rate pressure on property within Commercial Risk was offset with limit and coverage increases across cyber and other financial lines. Reinsurance net market impact was flat as rate declines and higher retentions were mitigated by increased limits and facultative growth.

Health Solutions continued to benefit from our ability to support clients managing rising health care costs, providing a significant contribution to net market impact. And one final point on revenue. Third quarter fiduciary investment income was $75 million, down 12% versus the prior year. While average balances increased, lower interest rates more than offset that benefit.

On Slide 8, adjusted operating income increased 15% to $1.1 billion and adjusted operating margin expanded 170 basis points to 26.3%. These results reflect strong top line growth and the operating leverage in our business powered by ABS, giving us capacity to fund growth investments in client-facing talent and middle market while still expanding margins. When we provided full year guidance, we highlighted 4 components that would impact 2025 margin expansion: NFP, fiduciary investment income, restructuring and operating leverage, all 4 remain fully in line with our expectations. We have now fully lapped the headwind on margin from NFP, and we are on track to meet our $30 million OpEx synergies target, resulting in a net 20 basis point headwind from NFP for the year.

While the outlook for U.S. interest rate cuts has shifted from 2 at the start of the year to 3 in the latest dot plot, the delayed timing of the first rate cut from June to September effectively offsets the additional reduction and the margin impact from fiduciary investment income remains unchanged at 20 basis points. Restructuring savings totaled $35 million in the quarter, contributing approximately 90 basis points to adjusted operating margin. We remain firmly on track to deliver $150 million in restructuring saves for the full year and advancing toward our $350 million run rate savings target by 2026. With ABS-driven scale improvements and strong execution year-to-date, we remain confident in delivering full year margin expansion of 80 to 90 basis points, aligned with our long-term financial model.

Moving to interest, other income and taxes on Slide 9. Interest income was [indiscernible] negligible in the third quarter and $4 million lower than last year. Interest expense came in at $206 million, $7 million lower than last year, primarily due to lower average debt balances. We expect Q4 interest expense to be approximately $200 million. Other expense was $13 million versus a $33 million benefit in Q3 '24, which included gains from the divestment of noncore personal lines and real estate advisory assets, partially offset by the remeasurement of balance sheet items in nonfunctional currencies.

We estimate Q4 '25 other expense to range between $25 million and $30 million. And finally, the Q3 tax rate was 19.2%. 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 $1.1 billion of free cash flow in the third quarter and year-to-date free cash flow of $1.9 billion is up 13% year-over-year.

As we complete the NFP integration, we continue to expect strong adjusted operating income, including contributions from NFP and ongoing working capital improvements to drive double-digit free cash flow growth in 2025. And turning to capital on the right-hand side of the page. I noted earlier that we closed the sale of NFP Wealth. And with over $2 billion in proceeds, the transaction significantly strengthens our capital position, and we approach the final months of the year in an even greater position of capital strength with enhanced flexibility. Importantly, we remain disciplined in allocating capital, balancing opportunities that meet our strategic and financial growth priorities with capital return to shareholders.

This discipline reinforces our commitment to creating long-term shareholder value, and we continue to execute our capital allocation model in Q3 '25. We reduced our leverage ratio to 3.2x in Q3, remaining on track to reach 2.8x to 3.0x by the fourth quarter of 2025, consistent with our stated objective. We continued our programmatic tuck-in acquisitions, including middle market deals through NFP. Through 9 months, NFP has closed $32 million of EBITDA. And following the NFP Wealth sale, we expect to close $35 million to $40 million in acquired EBITDA by year-end.

The pipeline remains strong, primarily composed of U.S. P&C opportunities. And finally, we returned $411 million to shareholders in the quarter, including $250 million in share repurchases. With $750 million repurchased year-to-date, we remain on track for $1 billion in capital return through share repurchases for full year 2025. Enabled by our high free cash flow generation.

These actions demonstrate our disciplined capital allocation, reducing leverage, investing in high-return growth opportunities and delivering meaningful capital return to shareholders. I will conclude my prepared remarks on Slide 11 with our 2025 guidance and some forward-looking perspective on our growth objectives. We are reaffirming our full year 2025 guidance, including organic revenue growth, mid-single digit or greater, capturing the impact of our growth investments. Second, margin expansion, 80 to 90 basis points, including $260 million in cumulative annual savings from our Aon United restructuring initiative.

Next, strong earnings growth, supported by the scale improvements from ABS. I'll also note 2 additional points related to earnings. First, the sale of NFP Wealth is expected to have an immaterial impact on 2025 earnings growth. Second, we continue to expect an effective tax rate of 19.5% to 20.5% for the full year.

For modeling purposes, we are estimating 7% to 9% adjusted EPS growth in Q4 '25. Finally, free cash flow, double-digit growth in 2025, demonstrating our ability to consistently convert our strong earnings into capital for investment and shareholder return. We entered the final stretch of the year with strong momentum, executing our 3x3 Plan and financial model to deliver results today. At the same time, scale improvements enabled by ABS, the cumulative impact of our growth investments and our capital capacity are strengthening the foundation for future performance, positioning us for sustainable top line growth and consistently strong earnings growth.

This powerful combination gives us high conviction in our ability to create long-term value for shareholders. So with that, let's open the line for questions. Daryl, I'll turn it back to you.

[Operator Instructions] Our first questions come from the line of Robert Cox with Goldman Sachs.

Just first question on talent. The revenue-generating hires were up 6%, and it sounds like you're executing on that 40 basis points contribution to organic growth here in the back half of the year. If we start thinking about stacking the benefits from the 2024 hiring in 2025 cohorts, does that get us to something like roughly 80 basis points in 2026?

Rob, thank you for the question. Well, before even getting directly to the answer, the first thing, and Greg may comment on this, is that you see the headlines across our industry. It's clear that competitors are aggressive in their recruiting efforts. And given the expertise and attractiveness of our talent, we're not immune to that.

So we continue to be super high focused on the investments right now. And as I said in my prepared remarks, I think we're on the right foot. Through 9 months, 6% increase in revenue-generating hires, that's right in line with the 4% to 8% that we communicated during investment days. And to your question, they are contributing right in line with our expectations on the full year, 30 to 35 basis points.

There will be a cumulative impact when these 24 cohorts ramp up. And as I said in my prepared remarks, the 2025 hires are also coming on board. We'll give specific guidance on the contribution from those hires when we come back in Q4 and talk about 2026. But the key point for us right now is that, that is a significant contributor to the 11 points of new business contribution to organic revenue growth. They're performing right in line with our expectation in terms of incremental revenue and ramp-up time, and there will be a cumulative impact.

We'll give the results of that and an outlook on that when we get into 2026 guidance on Q4. But make no doubt about it, the investments in these client-facing talent is a key part of the growth strategy, particularly in the market that we have now.

That's helpful. And then I just wanted to follow up on Commercial Risk, specifically in the U.S. business, core P&C. It feels like the double-digit growth is significantly in excess of what some of your peers are reporting. So I just wanted to flesh out what you might attribute that excess growth to -- I know you talked about data center construction and talent.

And also, I just wanted to ask if that result was flattered at all by multiyear policies.

Robert, I appreciate the question. And listen, we -- think about the growth result, this is continued progress. Continued progress. We're halfway through the 3x3 Plan, fully executed against it.

When you think about what we bring to the table with risk capital and human capital and then very substantially reinforced with Aon Business Services. Remember, these are the set of analyzers, risk tools that help clients make better decisions while driving revenue, also retention, obviously, have some benefits from the cost side, too, but really is around client impact. And you're seeing these results. And by the way, you're not just seeing it in the U.S., it's really globally and contributes to Edmund's commitment around what we're going to be able to achieve each and every year around mid-single digit or greater.

And so this is really what you're seeing. And I want to be clear, it really is just -- it's part of the day-to-day. There really isn't anything that we would highlight. We talk about M&A services.

It was progress, but it did not drive the results. The results were driven fundamentally by what we're doing the day-to-day with clients. And we did it, I would just also highlight in the face of all that's going on in the overall marketplace. So we talked time and time again about the fact that we're -- this is not about unit pricing in specific areas, and I'm sure we'll talk about pricing before the end of the call today.

It's not about that. It's really about a client-by-client impact and our ability to take analytics with our great team in place and do things that really have a meaningful impact. And that's really what's driving growth. It's driven the growth in the U.S., but also driving growth in the same respect around the world.

Greg is exactly right, Rob. We're pleased but not surprised by the strength in the Commercial Risk growth in Q3 because it's being driven by specific actions that we're taking, the durable growth drivers we talked about 11 points of contribution at the company level. But within Commercial Risk itself, it was 11 points of contribution from new business. And the retention was better year-over-year.

That's driven by what Greg just talked about, the analyzers helping us win RFPs by ECG, our Enterprise Client Group and the tools that we have in ABS. The outlook and the results in this quarter remained strong as we continue to have the hires in construction and energy as clients increase limit and add coverages. So we're going to continue to be focused on net new business plus retention and the investment in the specialty hires and giving them, equipping them with analytical tools that help them win new business. That's what drove it in Q3 within the U.S., but as Greg said, globally, and that's what gives us confidence in our mid-single-digit guidance going forward.

Our next questions come from the line of Andrew Andersen with Jefferies.

Just looking at Health Solutions, 6% organic, really strong and has been for a couple of years now. You listed a few drivers there of the organic input positive market impact kind of last there. But I would think that is one of the bigger drivers. Maybe you could just help us break down between net new business retention and market impact.

Yes. I mean you're right. There was an impact from net market impact as you continue to see health care costs rising, but make no doubt about it. Health is actually one of the largest parts of our portfolio when it comes to new business contribution.

Expansion with existing customers. Greg actually called out an example on the call of expansion with existing customers coming in through new business. So in the quarter, you had the strength from our talent analytics business. Our data continues to be seeing high demand.

Our core health business had strong growth in EMEA and U.S. as well. The market is attractive right now for these solutions and the macro factors are having an impact. So you are seeing a positive net market impact. But without a doubt, I have to highlight that it is new business that is driving this primarily expansion with existing customers.

And Andrew, I just might add, if you think about where we are in terms of the continued progression as we began the 3x3 program and thought about the areas we compete in, each one of them had a set of characteristics, which for us suggested our ability to grow and those are going to be very, very strong. Health is exactly in that wheelhouse. Think about it. This is 20-plus percent of the U.S. economy as an example, and growing at 9% to 10% a year.

It's tremendous burden on companies as they think about supporting their employees and their families from a health standpoint. And what we bring to the table is unique in content and capability. Just look at -- we recently published a set of analytics never been seen before around overall population health and the impact of the GLP-1 medications in that context, demonstrating that you might be able to say something we've never been able to say before, which is we can potentially improve population health and bend the curve. And so that kind of opportunity for us, we're incredibly excited about, and we're just beginning to sort of tap that thread.

And so for us, we love this category like we do across the risk side as well and the retirement side. But you're right, a lot of progress here, and we'll continue to take steps to build the business.

And then reinsurance, just as we -- I realize 3Q is a little bit of a lighter quarter, but as we kind of shift towards '26, how are you kind of seeing the reinsurance pricing environment? And maybe just some color on demand changes?

Well, listen, overall, Edmund can comment on '26 a little bit from that standpoint. But listen, again, think about overall demand and supply. Demand, when you think about what's going on in the world these days, greater and greater risk. There is absolute pressure on a unit price basis, as we've talked about, particularly on the property side, and you're seeing that really across the board.

But think about how we react. We react on a client level, and we're essentially helping clients understand how to mitigate risk on a much broader -- even a much broader scale. So this isn't just traditional treaty and facultative. Think about insurance-linked securities.

I started off with the obvious tragedy and the catastrophe in Jamaica and then talked about how we brought capital in to try to do something about that. We've done now -- we're going to do well over close to 150 or greater cat bonds or parametric instruments for companies in addition to insurers. So this is really the opportunity to bring more capital in to support an environment which is demanding it. What we described on the hyperscalers, this is an opportunity to truly address a level of opportunity that we haven't seen before.

It's truly unique. Think about $2 trillion of investment, and that's just the operating investment -- sorry, the build investment doesn't even get to the operating investment or the innovation investment, which happens over time. So for us, the content and capability we have in such an extraordinary group on the reinsurance side in the context of reinsurance and risk capital with our Commercial Risk capabilities is extraordinary, and we see great, great opportunity over time. Edmund, anything else you'd add to that?

Look, the only thing I'd add is we are seeing pressure on the rate side today. Reinsurance, the net market impact there was flat in the quarter. Clearly, we're seeing pressure in the property side of it. But to Greg's point, the demand is high.

Clients are buying more sideways coverage to cover perils. We are seeing a focus on our facultative placements, growth in our STG businesses. So again, we'll come back in '26 to your question in Q4 and talk about '26 specifically. But these pressures come today, and we still are in 2025, growing at a mid-single-digit level because of the demand and the solutions that we're providing for our clients here.

Our next questions come from the line of Bob Huang with Morgan Stanley.

So my first question comes around the thoughts on capital deployment. Obviously, free cash flow increased significantly year-on-year, but your buyback slowed down. I know that we talked about this a little bit. Just curious how you think about that capital deployment going forward between the acquisitions that NFP is going to make versus how you think about buybacks versus dividends?

Yes. So I appreciate the question on the capital. It's an important point for us. You said buybacks slowed down.

I want to just highlight that we were focused this year coming into the year, paying down debt to get back to our leverage -- debt leverage objective. We paid down nearly $2 billion, $1.9 billion last year. We're on track to do something similar this year, continuing to pay the dividend. Acquiring in middle market through NFP, which is over $32 million in EBITDA to date and returning -- we guided to returning $1 billion in capital to shareholders through share repurchases.

So we're -- despite sort of where we were from a leverage standpoint, our free cash flow generation has allowed us to do that. When we think overall about capital deployment, we have a set of criteria by which we evaluate the options. We started talking about that previously and emphasize it during Investor Day as well. Those criteria are focused on long-term shareholder value creation.

And so we're going to remain committed to balancing investment for growth with capital return to shareholders. And for us, that means paying down the debt, meeting our leverage objective, obviously, consistently paying the dividend. We're very pleased with what we deployed towards middle market acquisitions this year, and we'll be even in a stronger position to do that next year, particularly given the proceeds that we have from the NFP Wealth sale. But those acquisitions will have to meet, as I said during the prepared remarks, our strategic criteria and our financial criteria as well.

It's worth emphasizing, I showed some information during Investor Day that showed over 20% IRRs and over 10% revenue growth after owning these acquisitions for 1 year. So that gives you some sense about how we think about the financial return. And of course, we balance that with returning capital to shareholders. So we feel very good about the position of strength we're in and our ability to evaluate the options moving forward.

But let me turn it to you, Greg, to add some color to that.

Listen, I think you captured it exceptionally well. Maybe one observation I would just add. Edmund just went through a whole series of actions, a whole series of activities. Bob, hopefully, what comes through clearly is our absolute focus on long-term shareholder value creation.

And we're taking specific actions on the balance sheet side, the capital side, the capital deployment side to make that happen. Acquisitions and divestitures, these are difficult things to do. And if you think about just even in the last 18 months, bringing in NFP, which has been phenomenal, but by itself, a monumental effort. The decision to divest of a specific piece of NFP, which is good business, but really not one we're going to invest in and double down from a capital deployment standpoint.

So you make the decision to divest against that. That's a hard thing to do, a lot to cover on our finance side with our NFP colleagues, and it went exceptionally well, closed yesterday. The paydown of debt, the buyback, all the different pieces. What I'm trying to highlight here is we have an absolute commitment, and it's not just something we say, you see it in our actions, which is an active management of our balance sheet and our capital position, which happens to be currently the strongest it's ever been against the criteria on long-term shareholder value creation.

And the team has done a remarkable job actively managing this, just like we do on the operational side.

Really helpful. And also, apologies for a poorly phrased question there. Yes, you're absolutely right. My second question is going back to the data centers a little bit.

Obviously, it's a huge momentum for you and it's likely to be very long tailed. But just curious how you think about the competitive environment now that data center is very much in the front and center of discussions for insurance. Do you see large competitors coming in? Like how should we think about your market share in this expanding pie, so to speak?

So first of all, I really appreciate you asking the question. This is the wheelhouse. When you think about sort of what we have been built to do, think about levels of innovation, what we did on Aon Client Treaty when it first came out, what we did on the GLP-1s I just described, what we've done in multiple other environments, what we did on the retirement on the employment plan, trying to bring 401(k) economics to the middle market from large companies. All these things are innovations that we have driven over time.

And they come from a standpoint of truly requiring integrated capability, risk capital and human capital and the ability to bring capital from in the industry and outside the industry to bear on behalf of these challenges. All that's true, and that's a proof point in how we approach the market. This happens to be bigger than anything you've ever seen. $2 trillion, right? By the way, $2 trillion is only the build.

It's not the operating or the innovation that comes over time. So it's just the tip of the iceberg. This isn't really about competitive position. By the way, from our standpoint, we have taken a very, very hard, hard look at this, and we've taken a very much an engineering-driven approach.

I referenced the partnership we've got with a very unique firm that will be clear over time on how you take an engineering-driven position around where do you position these things? How do you think about where you build them, by the way? How do you think about the actual building? Not the core technology, we'll leave that to the technology companies, but literally, how do you do this in a way in which you can create better business continuity and business resilience.

When you think about business interruption in the context of a data center in this world, it is going to be measured in the millions of dollars per minute. It's going to be a completely different scale. So for us, what we want to do is bring a set of solutions, which may be copied by others. It will be difficult, but they might be.

And there's enough room for everyone here. The question is how we can increase relevance of our industry to help reduce the volatility of the operating -- building and operating of these data centers. And for us, it's a massive -- it really is unique. It's a massive opportunity for our industry to make a difference in a way that's going to really matter globally and get bigger and bigger over time.

But the scale is quite -- we've just never seen it before. We're pretty excited about it.

Our next questions come from the line of Mike Zaremski with BMO Capital Markets.

Sticking to the exciting data center conversation. Greg, you gave us some great color, potentially over $10 billion in new premiums in '26 alone for the industry. Any color -- is that -- are those premiums more of like a -- if you do the math and it was commission-based, there'd be a lot of growth. Is this mostly fee-based?

And is Aon getting a disproportionate share of this, you think? Or is it most of it going to the E&S market? Just any other color would just be great. Clearly, a great opportunity.

Yes. Listen, from our standpoint, it's still very early sort of in the process. So let's don't -- this is not mid-game or even end game. This is like the beginning of the game.

This is all beginning to sort of develop over time. And think about, Mike, from the standpoint of this is around how you build these things, how you operate them and then they evolve and they innovate on a time frame that's measured in a few years. So you're going to continue to iterate this. And for us, this is about accessing capital to connect with risk.

Whatever market it goes through, primary admitted E&S or frankly, alternative markets, we're accessing all that capital. And by the way, it's going to require access to all that capital. And then literally, how -- from our standpoint, we're looking to provide value for clients. We always find a way -- we do fine on compensation when we provide value for clients.

And ours is always a value-added approach in terms of how we think about it. And so we're, again, excited about the opportunity to make a difference, and we already are. As I mentioned before, we've already done some major programs underway, but we see potential to do substantially, substantially more. And by the way, this isn't just a U.S. opportunity.

This is a global opportunity. And for us, again, we see great opportunity. But really, the issue, Mike, is convincing the capital to come in and actually provide the coverage and do what we need to do on behalf of the hyperscalers. And really, it isn't just the hyperscalers, it's also the builders and then the money as well because if you think about sort of funds that are being created, opportunities there as well.

So for us, this really cuts across the ecosystem and represents a very unique opportunity.

Interesting. And my follow-up is probably for Edmund. On the accelerating Aon United program, can you give us a flavor of how much cash spend remains? And is that kind of evenly spread out over the next 5 quarters?

Yes. You should be able to -- we'll -- in the 10-Q, you can see what the cash spend has been over the time, we're just over $600 million in cash spend thus far or later this evening, you'll be able to see and I'm getting a signal when the 10-Q comes out. But the key thing about that is we're right on track for what we expected to spend there. We'll continue to assess that as we go into 2026 and more importantly, for us, the savings.

We did $110 million last year and on track for another $150 million this year. So we continue to feel good about setting ourselves up for ongoing scale improvements and capacity through that and capacity to invest in our capabilities and in our folks moving forward. So that's where we are in terms of spend and savings.

Our next questions come from the line of Jimmy Bhullar with JPMorgan.

So I had a question first just on organic growth in Commercial Risk. If you look at your results, they've accelerated over the course of the year, 5% in 1Q to 6% in 2Q, 7% in 3Q. And the change has been more than hiring -- the hiring tailwind ramping up alone. So maybe if you could give us some key drivers of the improvement, things that actually helped you in 3Q that might not have been there in 1Q?

I'm just trying to assess what -- which of these factors are sustainable versus might not sustain at 3Q. But just what drove the ramp-up in growth.

Yes. I appreciate the question, Jimmy. Maybe I'll just start at an overall high-level strategic approach, what we've done and then how we've operationalized it. And Edmund -- and I know we will add a lot of color on some of the detail here.

But listen, we came into 2024 with a 3x3 Plan. We architected, plotted it, put it in place, locked it down in '23 and announced it and drove it in '24. We said '24, '25 and '26, very straightforward. We talked about this on Investor Day. What are we bringing that's different?

What are you doing that's different? Well, risk capital is different. Human capital is different. We're connecting the dots in ways they've never been connected before, not because it's a nice thing to do, but because we can actually take the data that cuts across these theaters and pull it together under Aon Business Services and create better data fidelity so we can actually inject it into our analytics.

That drove a set of analyzers. We're going to kick off the Property Symposium early next year. And when we bring our 1,000 clients into the room, we're going to start with our Property Analyzer and what's going on. They're going to see things they haven't seen before with better data than ever before.

For us, this is a revenue driver. This is a driver of attracting clients. They see that opportunity. It's also an opportunity to change the retention profile, already a very strong retention business, but really the opportunity to win more clients, do more with them and keep them longer.

And that's really all the efforts around the 3x3. And then if you think about risk capital and human capital, really amplified massively by Aon Business Services, and we just continue to build momentum on this and then delivered through enterprise client and all the things we're doing in Aon client leadership. So it's one voice that actually brings the content of Aon on behalf of a client. So that's the 3x3. So Jimmy, we're halfway through that, and we're happy we made progress, but we have high expectations, and we're going to continue to make progress on -- against the 3x3 against that specific piece.

And then step back and think about NFP. We've accessed the $31 billion market with a great asset and a great set of capability. And it turns out the content and insight from Aon Business Services is highly applicable in the middle market. You think a CFO in a middle market company doesn't want to see opportunities to change the cyber risk profile they've got or do something about their -- what they pay for their 401(k) on behalf of their employees, all these things sort of come into play that really are part of the 3x3. So what you're seeing here is the progress on the 3x3 and what we laid out in the Investor Day, and we're working diligently to provide as much energy behind that as we can.

We call it basically industrial strength execution. And then you're right, we added on top of that priority hires. And Edmund is describing these priority hires, I think, exceptionally well, and they will continue to build on that chassis that I just described. That's -- it isn't complex, hard to do, but not complex.

That's exactly what we're trying to accomplish with the 3x3. We're halfway through, and you're seeing some progress. And we'll keep working the ball, but a long way to go here.

Our next questions come from the line of Tracy Benguigui with Wolfe Research.

I'm going to stick with the theme of the data centers. Just one quick one. You mentioned a recent client win that replaced nearly $30 billion in coverage for a top global data center developer. Does that represent any one-offs for the quarter?

It really doesn't. It's really just part of the ongoing piece. All I really wanted to do, Tracy, there, and Edmund can comment on this as well. I just give you an example that this isn't conceptual.

It's happening now. It's also an interesting observation. We have an opportunity as an industry to step up and really make a difference here. But irrespective of what we do, these are happening.

The investments are being made, and it's quite substantial. So I just wanted to provide a very concrete example of where it's -- where something is sort of ongoing. But also think about the data center that we actually provided coverage on in that specific example. That was, by the way, part build.

And in part, they have ongoing data centers in which actually help them understand how to think about the business continuity differently. And so for us, that is an ongoing effort. Again, back to why this is so unique. It's not just the build, it's the ongoing operation and then the innovation.

And that means this is not just a monumental opportunity. This is a sustained monumental opportunity, which is one of the reasons we're so excited about it.

Yes. And Tracy, the only thing I'll just add to it, I'll just be very direct that our growth in this quarter, in particular, is not because of one-off items or nonrecurring business, it really are the durable ongoing sustainable drivers that Greg just talked about, our data through risk capital and human capital, the middle market growth, the analyzers through Aon Business Services and then on top of that, the cumulative impact of the hiring that we're doing right now. So your question is an important one. I just want to make sure I highlight that point.

This is not sort of one-off or nonrecurring business. These are the durable drivers of growth that is driving our performance.

Awesome. I'm also going to take a crack at maybe sizing up the market share. You would have better numbers than me. But you announced in July your data center facility has up to $2.5 billion in capacity.

And then you talked earlier about $10 billion of new premium volume. Yes. So is there any way you could frame it in terms of is that the only vehicle that you're using to place the business? Or maybe you could just talk about all the ways that you could play in that business.

Tracy, I really -- this is going to evolve over time. I would say we're just at the start line. Maybe the most powerful message that Edmund and I are highlighting here is the work we're doing on what's next and an engineering-driven approach, which really starts fundamentally with how and where you build these and how you start to maintain them. And then asking the question around the analytics on what really is the potential volatility to be covered here and the risk to be covered here.

And then with our reinsurance and alternative capital hats on and our core insurance hats on, how do you create the capacity because the capacity here we're describing has never been seen before. So for us, we very much are very much at the start. It's almost kind of like, yes, whatever share we have, it's almost -- it's a nice start. We feel good about it.

But really, as these start to come online and the investments are made real time and they're happening, being able to step up to any share of that is going to be meaningful in the conversation we just had about our performance. And then we see tremendous potential. So yes, we believe we've got a unique perspectives. I'm not saying it's the best.

They're the perfect ones, but very unique. And by the way, they are integrated, risk capital, human capital. By the way, the talent aspects of this embedded in it as well. All these things sort of come together and we think put us in a unique position to both attract capital into this game on behalf of the hyperscalers, but also help the hyperscalers understand that beyond the technology, there are ways to conduct business with one of these data centers that actually might reduce cost over time and certainly could reduce volatility.

So this isn't the core technology, but it's everything around it that sort of makes it more attractive. And so for us, this is just the beginning.

Okay. And also just one quick clarification. So when you talk about revenue-generating talent up 6%, I'm assuming that's a gross number. Could you put context over maybe some talent exits and what a net number would look like?

It's actually a net number because this question has come up, Tracy. So we've just been very explicit about wanting to ensure that we give all the information that can -- to be transparent on it. So the 6% you should think about is a net number for those hires in the categories that we talked about previously, producers, brokers, account executives, health and benefit consultants.

Our next questions come from the line of Andrew Kligerman with TD Cowen.

Amazing quarter across a lot of metrics. Focusing on the organic revenue growth, 2 areas. Edmund, at Investor Day, you talked about 4% to 8% growth, net talent growth. Is that something you think that you could do going forward into '28 -- '26?

And then you've touched a lot on this call about middle market opportunities. Is that coming from NFP people? Is it coming from prior Aon talent. Where is it coming from?

I suspect it's your investments in analytics and human capital as you've addressed all along. But I'm kind of curious where in the company it's coming from.

Yes. So let me hit the first part, Andrew, and thank you for the question because it's an important one. And then maybe I'll turn the second on middle market to Greg as well. On the first one, I will sort of direct you back to what you and I have specifically discussed.

Our engine in ABS that allows us to get scale improvements up to 120 basis points, the expense discipline that we have, that gives us the capacity to make investments. And I think I sort of quantified up to 60 basis points in investments. Those investments right now are focused on revenue-generating hires in priority strategic growth areas. They're focused on some of our capabilities within ABS.

But the model itself is intended to be able to drive capacity to both invest and have margin expansion. We talked about 70 to 100 basis points as a sort of ongoing model over time here. And so we feel good about continuing to drive that growth engine and having the capacity. It's not a onetime thing for us.

We think a continued focus on this, making this ongoing in the right areas because that changes over time as well the growth areas. We're focused on making this an ongoing part of our strategic growth model here. And Greg, maybe to you on the middle market piece.

Yes. And listen, before I get to the middle market, too, again, Andrew, I appreciate the question. Remember back to Investor Day, we talked about the 3x3 and all we are going to accomplish risk capital, human capital, ABS, delivered through enterprise client, all the pieces around that and the investments we're making behind that. And then Edmund described what really is the growth algorithm and what we're trying to do.

That piece, go back to the math behind that, really, it truly does kind of capture everything we're doing operationally to a financial outcome, which is really the capacity to improve margin and invest on an ongoing basis. This is a very -- for us, very powerful construct. And that's why we were so committed, and that's why we made the investment on the $1 billion to kind of make that really happen and bring that to life. So I don't want to lose that.

That's so important in sort of your question. And then fundamentally, middle market is one aspect of that. It's the $31 billion North American U.S. market that we didn't have access to in the way we do now. NFP, high expectations, as we described at Investor Day, exceeded in so many ways in terms of what we've been able to accomplish, not just as the middle market segment, but also what we can bring to the middle market with our content and capability and what NFP has brought to Aon in their view, so -- and perspectives and their client leadership.

So for us, it was one aspect of the entire growth algorithm that's sort of being brought to bear here, but an important one and an exciting one. And we're very pleased to have brought NFP into the Aon family to do this.

Got it. And as we kind of approach the end of the year, it seems like with that divestiture of the NFP Wealth business, you've kind of met your leverage objectives. So as you do look at M&A, and you talked about $32 million of EBITDA for NFP deals in the quarter. Are there potentially big ones out there that you could do?

Is that something you're thinking about? And do you feel like 1.5 years in, you're ready to do it now that NFP is assimilated enough that you could do a bigger middle market type deal?

So Andrew, I think Edmund might have answered this earlier in the call. I'll answer it again. He'll do it better than me, no doubt. Listen, you know where we are.

We are absolutely focused on long-term shareholder value creation, making the decisions to sort of drive that. That's the capital allocation piece. And as you highlighted, we actively manage this. This is not something we leave the chance, and we'll take the hard decisions, the difficult ones.

The divestitures are hard, but they're important because they create capacity to do what we need to do. And then we'll make calls based on what really is the best answer from a long-term shareholder value creation opportunity for Aon. So you're right, we've got great flexibility based on the terrific work of our teams around the world from a balance sheet standpoint and anticipate we're going to do our level best to make sure we're making the right calls on behalf of long-term value creation.

I would now like to turn the call back over to Greg Case for closing remarks.

I just want to say thanks again for joining us, and we look forward to an opportunity to talk with you in the next quarter. Take care.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.