Aon CFO Edmund Reese on 4Q Earnings, Global Risk Outlook

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1:30Do that, do that, do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. Bloomberg Audio Studios, podcasts, radio, news. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Aon reported earnings this morning. EPS and adjusted operating margin beats. Top line revenues a little bit below expectations. Stock has been up about 2 % intraday at its high today. Stock's slightly lower year to date, and it's slightly lower in 2025. We've got a great guest to talk about the company's business, the outlook. We welcome back Edmund Reese. He's executive VP, CFO of the nearly$75 billion market cap insurance brokerage company.

2:18We're talking, of course, about Aon. He joins us once again in studio. Nice to have you back. How are you?

2:22Edmund Reese:Thank you for having me, Carol, too. Nice to have you. Very good. So tell us, before we get into the quarter and talk about the business specifically, we keep asking leaders what it's like to be a member of the C-suite in this environment. Well, I mean, this is a very, for us and for our clients, it's a very volatile and uncertain environment. There's a ton of news today that may bring some stability to it. But for us, it's requiring more of our services and demand from our clients. There's a lot going on, and we have solutions that can help our clients protect their businesses and grow their businesses.

2:57Edmund Reese:So there's a lot going on. It's an exciting time to be in my seat sitting with Aon. Do you ever lie there at night before you go to sleep and say to yourself, I really hope I don't wake up to a social media post from the president about the insurance industry? Well, look, I think we all have the same objectives here, and that's really to help this economy be able to move. and we provide solutions to help the clients with that. So volatility actually for us in many cases is a positive thing because we think we have data and insights and solutions that can help companies move like that. So when there's a post like that, it actually means more demand for our services.

3:34That's what I want to ask you, though. You mentioned volatility that your clients are dealing with. What are the biggest aspects of volatility that they keep mentioning to you? What are the risks that they are most worried about in today's environment?

3:45Edmund Reese:When I last came onto this show, I used this term, the megatrends. And I'd categorize what our clients are talking about right now in those same categories. You're going to be familiar with them. When we think about technology, they're talking about data center builds and digital infrastructure. And that is a demand supply issue today. Is that a number one? That's one of the top items right now in terms of growth. We had great results that we can get into. That was one of the drivers of growth. They're talking about trade. I just saw a headline on your newscast here that talked about a$400 million tariff-based revenue hit.

4:21Edmund Reese:They want to know how to manage their supply chains and diversify those things. They're talking about the AI impact on workforce as a result. They're talking about the storm here in New York, weather, the four megatrends. So those trends, I think, are still top of mind. They might change each time that I come on to this show, but they're still top of mind for our clients, and that's where we're helping them. What happens to your business, though, if the AI trend unwinds, if the AI trade unwinds, if we don't see the productivity and we don't necessarily see the value that is promised with AI? I think we have a long runway before we start to see.

4:57Edmund Reese:Right now, the fact that companies are investing in AI, they're really starting to reevaluate, as an example, their workforces. What is the job architecture going to be? What's the pay structure going to be? What's the benefits going to be? We have data and analytics. We have a database, Radford McLaughlin, that many of your viewers here would be familiar with, with over 30 million employees in it. So we know that companies are investing because we see jobs with this description and up 2 ,000 % over the past couple years. And we can help companies think about this workforce transition. We can help them think about how to upskill and reskill their employees so they can work alongside with AI.

5:38Edmund Reese:So it might change, but we know that the investment is large. We know that this is a long journey ahead before we start to see a shift. There's a lot of work and insight that we can give clients right now on it. Let's talk about earnings. And unfortunately, as you know, we in the business media and journalism like to know about the outlook. You did give an outlook. And I am curious how much in terms of data centers, because you do talk about that a lot with us, how much of that is a tailwind in your guidance for 2026? I mean, should AI investment unwind rapidly? Would that be meaningful to your top line expectations for 2026?

6:15Edmund Reese:We have a broad-based business. We're operating in 120 countries right now. We have broad solutions across commercial risk, across reinsurance, health, and wealth. The data center, the AI, the technology is a component of it. The guidance that we gave was for mid-single-digit or greater growth. Mid-single-digit or greater growth. And by the way, we're going into the third year of our three-year plan. We set three-year plans here. And that will be a component of it. But look. So you're not overly exposed in any way. I'm not overly exposed to that. It's not like it's a quarter of the business. In fact, we think it's probably a tailwind that further supports the mid-single-digit growth that is not baked in at extreme amounts at the moment as we think about the guidance.

7:01You know, I ran into a colleague who I haven't seen in a bit of time today. and we were talking and I was just like, we both agreed, I can't believe January has been like this already. You know, things were kind of slow in the first few days of the new year and then you had everything happening in Venezuela. We have everything happening at Davos. We have this, you know, quote, armada on its way to Iran, Greenland, everything there. Given what has happened in recent weeks, are you seeing clients looking to expand protection for things like trade credit, contingent business interruption, war, terrorism, those things?

7:35Edmund Reese:I'd add to it political insurance, cyber. So, yes, demand risk is increasing. And, in fact, one of the things that you showed the slide of our company, but the industry in particular, one of the things is that maybe pricing has been coming down in recent times. And clients are seeing that as an opportunity to increase their limits across the categories that you just talked about. They're seeing it as an opportunity to increase coverage. Do I have enough cyber? They're seeing it as an opportunity to expand across their overall portfolio and have better protection to grow their business. And that has been the driver of the growth that we've seen over the first two years of our plan and why we're so confident in our outlook going into 2026 as well.

8:20One of the things I wanted to ask you, we've only got about a minute or so left here. You guys put out a review and you talked about the L.A. fires. And it was overall global economic losses stemming from disasters, including thunderstorms and earthquakes, totaled about$260 billion. And I think there was global insured losses of more than$127 billion from natural disasters, dominated by more than$100 billion occurring in the U.S. after the L.A. fires. How do you continue to address global climate change? I mean, we have done a story here at Bloomberg about so many people who haven't been able to rebuild because there's fights between the insurers and I think utilities or the city.

8:58Like, who is responsible for that? Those costs. Meanwhile, people don't have homes. Forgive me. I'm only saving about 45 seconds. How do you guys address this?

9:06Edmund Reese:That is one of the four mega trends that I just talked about. To the point that you just made, it has been that record highs. 25 was kind of flat, but you just said 127 billion. So it's been growing at record highs. California wildfires, maybe$40 billion itself. The storm that we're facing here is now projected to be a billion dollars, so not as much as some of the disasters that you just talked about. But the way that we help companies and clients deal with this is not just coverage. It's about building resiliency in California wildfires and some of those places. It's about preparing for it. And we have the expertise, the engineering, the insight and analytics to be able to help you take the actions to help you become more resilient and prepare for that.

9:50So glad we could get you in before January was over. Thank you. Edmund Reese over at Aon.

9:58They told us to expect change. They warned us about the transition. But honestly, they forgot the best part. This is the chapter where we finally focus on us. Life MD delivers expert menopause and midlife care right from your home. From hormone health to holistic wellness, LifeMD helps you feel your best for the best years of your life. LifeMD, it's just getting good. Visit LifeMD.com slash goodlife. Hello, hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna, and I asked him, how can companies use AI to its fullest potential to create smarter business?

10:45My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind. If anybody is not using AI to make their developers who write software 30 % more productive today with the goal of being 70 % more productive. Yeah. So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We're happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology.

11:31It's getting people to accept that there's a different way to do things. To listen to the full conversation, visit ibm.com slash smarttalks.

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