Aon plc AON

Key data

The business

Aon does not insure anything. It stands between a company that needs coverage and the insurers who write it, runs the auction, and keeps a fee whether the winning insurer makes money on the risk or not. A treasurer renewing a $200 million property program calls Aon, not each insurer. Commercial Risk, that brokerage business, is about half of revenue. Reinsurance does the same job for insurers, Health places benefit plans, Wealth advises pensions. One model: a toll on the world's insurance premiums, collected by the firm with the broadest data on pricing risk. The tension is that the toll is a percentage of premium, so when prices fall the same policy pays Aon less, and 2026 is the first year of falling prices after the hardest market in a generation.

The numbers

Organic growth has drifted down for a year while margins hold, and the acquisitions on either side are what the multiple is arguing about.

Company-reported. Q4 2025 revenue derived as full year less nine months. Adjusted EPS excludes the NFP Wealth sale gain.

The June quarter landed a penny above consensus on adjusted earnings and a hair under on revenue, every segment growing organically at exactly 5%: nothing carried anything, the franchise ground it out. Management's measure of pricing help, net market impact, was "modestly positive" inside its zero to two point range, so almost none of that came from rate. Free cash flow fell a third year over year, $267 million of it tax on the Wealth sale.

Company-reported. 2021 free cash flow is after the $1 billion Willis Towers Watson termination fee.

Adjusted earnings per share compounded 9% a year from 2021 to 2025, half the revenue growth bought. Consensus has next year at $18.80 and 2027 at $20.65, the stock at 16 times the nearer number. That growth is assembled from mid-single-digit organic, 70 to 80 basis points of guided margin expansion, and until two weeks ago a buyback shrinking the count 2% to 3% a year. USI removes the third leg: no repurchases while the deal is paid down, leverage targeted at 2.8 to 3.0 times about two years after a fourth-quarter close, dilution in 2027, accretion from 2028. For two years the per-share engine runs on organic growth and margin alone, roughly 7% to 8% a year, and the reward for waiting is $3 billion of USI revenue and the buyback back in 2028.

Company balance sheets and the August 31 announcement. Trailing adjusted EBITDA of $5.9B puts gross leverage at 2.5 times before USI.

Aon declared the NFP leverage objective met in late 2025 and is borrowing the whole amount again at 14.5 times synergized EBITDA, which is not cheap. What this memo believes that the market does not: broker fees are stickier through a soft cycle than a percentage-of-premium model looks, because client exposure and headcount grow while the rate falls, and 5% organic against property rates down 12% at Marsh is that stickiness measured. The print that settles it is third-quarter organic growth on October 31.

Management

Greg Case has run Aon since 2005 and sold no stock in the last twelve months, and his only Form 4 activity was a February vesting with tax withholding and gifts. The chief financial officer resigned on August 17, two weeks before the USI announcement, and an interim replaced him, the fact in the record that reads worst and that the filing does not explain. Director Lester Knight bought 20,000 shares in the open market on September 2 at $326 to $331, about $6.5 million, the day after the deal hit the stock, no plan box checked. The general counsel sold about 22,600 shares since November, plan status not found. Buybacks ran $1.6 billion over four quarters at an average near $333, above today's price, and are paused. The dividend rose 10% in April. January guidance was reaffirmed in May, July and with the USI announcement. I have watched serial acquirers make this move at a cycle top, and the ones that worked had finished the prior integration first, which Aon says NFP was at June 30.

How it fails or surprises you

Leverage in a soft market. Gross leverage of 2.5 times jumps past 5 times at closing and must reach 2.8 to 3.0 within two years, funded by free cash flow that fell a third in the June quarter. If organic growth slips to 3% or 4%, deleveraging stretches, the buyback stays paused, and 2028 accretion lands on a bigger share count. The test is free cash flow conversion against 2023 over the next four quarters.

The pricing cycle takes the fee down with it. Marsh reported commercial rates down 6% and property down 12% in the quarter Aon grew 5%. The offset is client growth and casualty still up mid-teens. If casualty turns and net market impact goes negative, organic drops below the guided mid-single digits. January 1 reinsurance renewals show it first.

USI integrates like NFP did (right tail). NFP closed in April 2024, was declared substantially integrated by June 2026, and the debt taken to buy it fell $2.3 billion in twelve months. If USI repeats that, Aon exits 2028 with $20 billion of revenue, leverage at target and the buyback restored. The market pays 16 times for a business it just decided is over-levered, and the first sign it is wrong is closing leverage under 4.5 times and integration cost below NFP's $77 million first year.

The shape of the payoff

Nothing in the next four quarters resolves whether USI was a good purchase, and the pricing cycle turns on no schedule. What matters is whether organic growth holds mid-single digits while property rates fall and the balance sheet digests a second deal. The evidence says the core does that: five straight quarters of 5% to 7% organic, margins on plan, the last integration finished and the last debt paid. The price says the market will not pay for a repeat. The downside is two years of 7% to 8% earnings growth at a multiple that does not move, dead money rather than lost capital. The upside is the 2028 business at a multiple back inside its own twelve-year range, which from 17 times is the larger move. In judgment, the fatter tail is the upside: the failure is slow, the success is a re-rate.

Closing thoughts

The bet is still that companies keep paying Aon its cut of every policy it places, and that the cut grows while insurance gets cheaper. It breaks if organic growth prints below 5% while free cash flow keeps falling, and the two numbers to watch together are third-quarter organic growth and the leverage ratio Aon reports at closing.