Third Bridge专家称商业P&C保险市场软化但Aon经营仍具韧性

[[00:01:44]]
How are you seeing the commercial P&C [property and casualty] market right now? What shifts could we see moving forwards?

[[00:01:54]]
I look at that three-dimension. I guess in one word, it's soft or maybe better said it's softening. It's very competitive generally among carriers. The unique thing right now is that that softness is in all four major commercial product lines, property liability, financial lines, and workers' compensation. Those product lines typically make up 80%-plus of an insurance buyer's spend. That softening market is very impactful. Keep in mind, we're talking premium rate. You also have to factor in exposure base to develop a full premium price. A property buyer might see a 15% rate reduction, but their insurable values might be increasing 10%, which is not uncommon with today's inflation. You have to factor that in. Number two, it's not one-size-fits-all. A lot of markets are one-size-fits-all where just softness is being applied generally to the entire category. Carriers are retreating on rate, like I said, but they're balancing that with the client's risk profile, and they're being very consistent with it.

By a client's risk profile, the client-specific claims history, the industry they're in, their risk protocols and so forth. It's not a consistent across-the-board thing. It's not a fire sale, "Hey, 20% off for everybody." Not only is it softening product line-wise, but there's also market pricing subsets in those product lines. There's some discipline in there by carriers, but the bottom line is prices are softening. Number three, it's full of client opportunity. Does the client take a premium reduction, soften a covenant in other ways like improving coverage terms, buying additional limits, improving their deductible levels and things like that? A good broker that knows your business and knows your cost of risk priorities can chart those opportunities for you.

[[00:04:06]]
From the client's perspective, is there a way to generalise what you see some typical clients doing, such as taking a premium reduction or improving limits? Do you see them choosing higher limits over premium reduction?

[[00:04:33]]
I hate to give you a pat answer, but it depends on the client. Most of them, all insurance buyers have a budget, so the fact that they can beat that budget is never a bad thing. We do see most of the larger clients, a middle market client will customarily just take that discount and run. The large account, the risk management buyers that have a large cost of risk and a sophisticated cost of risk will very often balance it. They'll take some of the savings, but they'll look at how do we improve our coverage terms. We've had this pesky exclusion that my General Counsel has been worried about. Can I buy that out of this programme or do I look at investing at risk areas that I previously haven't been able to afford? Do I take that USD 200,000 savings in property premium and go out and buy cyber insurance for the first time and walk down the hall to the General Counsel and say, that cyber insurance you've been suggesting, we're now putting that in place for our overall corporate benefit.

[[00:05:59]]
How are you seeing brokers' ability to see organic growth, given either the premium reductions or the softening market?

[[00:06:19]]
It is an issue. By the way, on that softening market, one thing to keep in mind, and this is going to be impactful to organic revenue at a minimum for the next year, because no one sees this softening market going away anytime soon. There's lots of variables that drive the market. Quite frankly, most of those variables are pushing the market to continued softness and not the opposite because generally, a market, is in relation to two things, how much capital is in the market and how much loss activity is in the market. Quite frankly, both of those, if you're a client, they're trending positively, meaning there's a lot of capital out there and loss history generally in the insurance market is on the lower end. All that's trending towards a continued positive pricing, maybe some flattening of it at the worst, but that does create headwinds for brokers. The larger brokers like an Aon, especially in their large account business, have a pretty material proportion of that business on fee compensation as opposed to commission compensation, so they might not be impacted as directly as, let's call it, a full-time middle market broker that has 95% plus of its business on a commission basis.

Larger brokers, and I would put Aon in this category, typically have a broader relationship with the client. Like I mentioned earlier, if that client is looking to do other things taking advantage of the soft market like buy additional limits or buy new coverages or things like that that contributes to organic growth, maybe not call it organic growth increases, but maybe just the maintenance of their organic growth on a particular client. There is impact and it certainly benefits the client, which is the most important thing, but it's not critical. Brokers have charted these market waters for many years.

[[00:09:16]]
How much organic growth do you see for Aon? Where do you see it trending moving forwards?

[[00:09:28]]
That's a really good question. I think that's probably one of the most important things to talk about, when you talk about this industry or a particular player like Aon. Aon's business is very resilient and it's very diversified. It's diversified in client segment and product mix and geographically. They focus in two business segments, risk capital and human capital, which are front and centre issues with all clients, all businesses today, especially the larger one. The world is a risky place, and it's getting more so. Businesses need help managing through that risk paradigm. In the simplest form, organic growth is new business netted against lost business or lost business being a retention rate as Aon calls it. By the way, Aon, and this is public. Aon announces or releases its earnings and that organic growth, which is critically focused, they began, I believe it was last year, calculating a market impact slider. When we talk about market impact, the plus and the minus, Aon has inserted a governor in that.

When you talk about where they're going, I think you got to talk about where they've been. You've got to look at their 10-year organic growth averages, which is a nice base to look at, where commercial risk over that 10-year period has averaged 5%. Reinsurance has averaged 10% organic growth. Health, 7% and wealth, 3%. With that in mind, and this is Matt's personal opinion, but I tend to accept and agree with the guidance Aon is providing, which is an aggregate across all of those businesses, an aggregate mid-single-digit or above organic growth rate. Let's say that again, an average across all the business, aggregate mid-single-digit or above growth rate. The good or maybe the frustrating with Aon is how does that play out QoQ and YoY. When you have a very sophisticated business like Aon has, and it has that diversity in it.

Let's take the Q1. In Q1 2026, which Aon released last month, a total 5% organic growth rate, which was the same as the growth rate in the Q1 2025, again, 5%. Those growth rates were achieved differently. In risk capital, insurance was 7% this year and 5% last year. Reinsurance was 4% and 4%. On the human capital side, health was 4% in '26 and 5% in '25 and wealth was 1% in '26 and 8% in '25. I see those both aggregated to a 5% organic growth rate, but Aon achieved it in different ways. When you look at how is this going to trend going forward, it's not so easy. These are my personal views, and I have no insider insight. I couldn't speak to it if I did. As I said, the guidance Aon is given around organic growth resonates with me. Yes, the risk side is more transactional and both insurance and reinsurance face insurance market headwinds. When you talk about future organic growth, it seems to me, and again, this is my personal observations from following the industry, is that there's going to be more pressure on the reinsurance side of the business going forward. We've seen more recent softening in reinsurance and the signs are that that's going to continue.

Aon also operates globally. They see fluctuations in their geographical performance around the world, but that's the good and bad you take when you run a global business. We all know that the US is the 800-pound gorilla and influences the results the most. 50% of Aon's revenue is United States-driven. The US had a strong performance in insurance in Q1, which fuelled their largest area of organic growth, which as I mentioned earlier, was commercial insurance at 7%. I think it's going to be really interesting also, Q2, I love this stuff. Q2 is just going to be a pivotal period and those earnings calls will start next week. I think Aon's in a couple of weeks, but it's just going to be a pivotal period for the industry. It's going to reveal a lot of things about what's going on in the market, and it's all also influenced or impacted by this AI cloud that everybody is talking about in the insurance space as well. Just a couple of more comments about Aon's growth.

I want to bring it up because I really strongly suggest that your clients that they haven't seen it, look at the June 2026 Morgan Stanley US Financial Sector Conference, where Edmund Reese, who is Aon's CFO, spoke. He didn't speak at length, but he highlighted how Aon has evolved through. When you look back two or three years ago, Aon's organic growth was lagging its peers. Now organic revenue growth is, as he said, 150bps over the industry average in general, with commercial risk being 440bps above the industry. That sounds positive to me, and he feels Aon is in a good space. As you look at the future in both '24 and '25, Aon experienced 6% organic growth. Obviously, they slid back to 5%, but I think that Aon is well-positioned for growth. The issue out there that might put a cash certain doubt over things. Again, is this AI disintermediation subject that's come up. I'll stop with that.

[[00:17:34]]
Would you expect Aon to continue to beat industry averages and competitors' organic growth moving forwards with everyone in the mid-single-digit range?

[[00:17:59]]
Like I said a moment ago, I think Aon's diversity is an advantage, but to be candid, Marsh has that diversity. Gallagher has that diversity. Willis has that diversity. Those are top 10 publicly traded brokers. You see other brokers that are more middle market oriented, especially the ones that have evolved now out of private equity M&A rollouts that just don't have that diversity. I think organisations that are more conditioned upon transactional commission work are going to be impacted as we proceed through this soft market. I'm bullish on Aon's performance. Does it beat its peers? I don't know. It seems to me like I like their chances to continue to be an industry leader. That doesn't mean the number one, but certainly one of the industry leaders in organic growth. That organic growth, in that Morgan Stanley conference, Mr Reese spoke about how that organic growth is evolving or is applied at Aon. This is something that's questioned all the time about producer investments.

The CFO said that Aon targets 9-11 points of its organic growth coming from new business. It was 10% for the last two years. It was only nine points in Q1. What happens to that, because if Aon is going to continue to be an industry leader, their sales engine has to perform. Your clients that listen to our conversation might say, "They were only 5% or 6%. What does that mean that new business is 9-11%. You net lost business out of new business." Aon has a strong retention rate, one of the better retention rates in the industry in the mid-'90s and retention rate is the inverse of lost business." Aon is losing the equivalency of 4-5 points in the organic, so you take that 9-11 points and subtract out 4-5 points and then they put in a one-point slider for market conditions, and that's how they get to 5% organic growth.

[[00:21:35]]
You talked about Aon's strong retention. Is there an ability to raise that even higher, or do you see any imminent risks for retention falling lower as competition continues to increase in the current market environment?

[[00:22:06]]
Obviously, the insurance market pricing and cycles impacts that. Let's consider one thing. That's what Matt says, what does Aon say? Aon has said publicly, and they highlighted this at their Investor Day event last year in which they acknowledged the impact of market pricing. You can pull that up from Aon's investor website and look at Investor Day, what was last year, 2025. They have a 10-year chart that tracks the correlation of revenue growth by year in relevance to nominal GDP and market status. Aon would say, "Our results are more correlated to GDP growth than they are market cycles", which is a very interesting point.

[[00:23:35]]
How are you viewing…

[[00:23:42]]
Sorry, I don't think I completed your question. Sorry to interrupt you. There's no doubt that there's impact to Aon, but again, it's such a diversified organisation and it's a data and analytically inclined organisation. That's their reputation for being very smart at how they run their business.

[[00:24:28]]
You talked about producer investments and how we are seeing a talent war for strong talent. How much of a factor do you see that impacting the industry and Aon's strategy and ability to attract and retain top producers moving forwards?

[[00:24:58]]
I wouldn't say that there's a talent war out there, but there's certainly, I define it more than just a skirmish. The talent in questions, the producers rule the roost, so to speak, and so the heavy focus is who's hiring producers, who's hiring producers. We talked about that 9-11% organic growth boost based upon new business sales, and that's typically driven by producers. The war on talent includes both… Excuse me, the skirmish on talent. I'm going to stop using the war word, includes not only producers, but client relationship managers as well as subject matter experts that are placing business, such as a cyber broker or a property broker or things like that. I was really happy and uplifted to see the commitment, the stake that Aon put in the ground with the 3x3 strategy plan and 2026 is going into the third year of that 3x3. That's their three main focuses for a three-year period. A subset to one of those is to invest for growth and investment of 4-8% increases in their talent pool. That's across all three of those pivotal roles. I think that's smart on Aon's point behalf to hold themselves accountable to that.

What they've also tracked and then this was released at the Investor Day last year, and Aon mentions it on almost every quarterly earnings statement is their feverish efforts to hire producers. They're tracking those cohort classes across '24, '25, and '26. They've even, not in detail, but they've started talking about now as these classes each year start to mature, they are starting to speak towards the contributions that are being made by these new producer hires to the overall sales results of Aon. I think having that transparency, and it's not a client issue, but it's just a transparency of how they run their business and what's important and being transparent about it, I think, has been very refreshing. It is really hard to stay net-net neutral with your producer bench. There's a lot of movement of those people, not only in retirement, but competitor-to-competitor or in or out of the industry. It is very hard to even maintain net- neutrality with your producer camp, much less grow it in any material way. Mr Reese, the CFO, has spoken about those investments and has even been as insightful to mention where they're seeing some of those results, in what industries and segments and so forth.

Aon is doing the right thing. It's just the issue of there's a lot of money out there. The whole landscape of what's been happening over the last few years with private equity investment into the insurance distribution industry is driving a lot of this. There are new players in the industry and the overall industry structure and how it operates is changing and the dynamics between retail brokers like an Aon and wholesale brokers and MGAs and MGUs and things like that, speciality players is changing, I wouldn't say radically, but very materially. All of those people are looking for distribution talent. Not to be silly, but who do you rob when you want money? You rob a bank because that's where all the money is. Places like an Aon have immense amounts of talent. It's a good culture, and that talent is committed to Aon and their talent retention rates are fine. There's a lot of people looking for talent out there, and it puts Aon and any broker under pressure.

[[00:31:21]]
In February 2026, we saw pressure from all of the larger insurance brokerage equities. How are you viewing the impact of AI on Aon moving forwards?

[[00:31:46]]
To be candid, I think that the impact from AI is huge. That's just my personal opinion. That event or sell-off or whatever you want to call it, during the middle of the Q1, which happened really related to a specific transaction or event in the AI space that people felt would have impact to insurance that was big and not just to the stock price of those publicly traded brokers, which they did take a hit, but it's inserted a cloud. I think what people are losing sight of, there's a positive side to AI and the value that AI creates to the business of the smart and well-capitalised brokers. Speaking about Aon, Aon has made many public statements and insights into its AI plans. I believe Mr Reese mentioned it recently at the Morgan Stanley conference. He and Greg Case, Aon's CEO, certainly talked about that in their Q1 earnings call. Like I said, Aon was talking about AI in the H1 2025 before AI became this, quote, unquote, thing on the brokerage landscape.

AI is being used or is being evolved by the brokerage industry, just like it's being evolved by any industry out there. AI is, I should say definitely, AI is likely probable to have a big impact in the brokerage world, again, to the larger, smarter, well-capitalised brokerage organisations on their revenue generation opportunity, their margin enhancement opportunity, their client experience opportunity, the evolution of the products, all those things that impact top-line revenue and bottom-line margin, AI is going to have a positive contribution too. That's before you start looking at how can I apply AI into my overall technology strategies and the efficiency and effectiveness of just how I run my business. Forget about the client-facing side, forget about the revenue generation side, just how do I operate and administer my business? I think there's a focus on this disintermediation issue that clouds the positive side of it.

Again, this is one man's opinion, but I think the positive side to Aon and the larger, smarter brokers is much more powerful. The positive side of AI impact is much more powerful than their potential for disintermediation of the brokerage role. Now what you have to think about is who has the most disintermediation exposure. I think that most people see that certainly, first and foremost, as the personal lines business. Then maybe when you apply it to the commercial side, it would be the small commercial end of the insurance industry. One thing that Mr Reese, Aon's CFO, recently noted, and I think that this is very interesting, is that personal lines and small commercial business equals 2% of Aon's revenue base. Personally, I don't think he was dismissing AI as a challenge to an insurance organisation, but he did note that it equals 2% of their revenue base.

I don't personally think that the fear is as prevalent in global large account and upper middle market businesses, especially one like Aon that has great diversity in the insurance marketplace, operates one of the most successful reinsurance intermediary businesses in the world and also has the human capital side, which is less transactional and more consultative, not that AI can't translate into consultative impact as well. I think that diversity makes me not have as much fear as I look at Aon, but I'm sure Aon's being careful about it.

[[00:38:13]]
I want to talk about the positives from AI and break it down by revenue-generating vs the efficiencies on the back end. Starting with the revenue-generating opportunity, where do you see AI helping for the producers and Aon specifically? Do you see producers being able to handle more? Do you see identifying new risks for clients? Where do you see the gain?

[[00:38:52]]
I do think there's revenue impact across all of Aon's revenue-lever operations, so let's talk about them. I think Aon is really sophisticated in how they do market planning across the world. Where is their market opportunity? What is their position in it now? Where are those markets going? How do you attack them? What is the qualitative and quantitative value of a market? Aon does extensive marketplace planning. I think the insights that AI tools can make into that is going to make Aon smarter as it identifies revenue growth opportunities. They don't become a byproduct of just what is trending, but where are they carefully making investments and bets in their business and how do they identify those revenue opportunities? It also gives them insights into specific organisations and helps Aon identify… Aon is really effective at qualifying and quantifying any organisation's risk profile, both on the risk capital and the human capital side. In the early days, you'd have to say that AI tools are taking that analytic to an extremely deeper level.

Almost all brokers utilise CRMs, customer relationship management tools and Aon does, too. They're very good at it, and they very often quote how that impacts their business and they know when, where, and why, and how they win or lose. I think the capabilities that are AI-specific, and that's a little bit over my head from a technological standpoint, but make Aon's ability to do that even more special. It gives tools to that producer or to that client manager that makes them just more effective to understand the client that they're dealing with. Aon is already sophisticated as to how they delve into that. I think AI is just going to take that to a whole new level. That's going to drive top-line revenue growth. Then when you look at how AI is impacting, what Aon is doing in the risk-modelling area, there's a huge evolution in client expectations, and that is they're looking for customisation of any product they receive from a broker, number one. It's customised to them and their business. The whole world has become so data and analytically based, they're looking for risk-profiling and risk-modelling.

Aon made a commitment three years ago to improve that. I think that's going to take that to a much more valued level of revenue opportunity for Aon. One thing that Mr Reese has mentioned, and I can't remember if it was Mr Reese or Mr Case or both, is that Aon has these risk-modelling tools, they call them risk analysers. It would tell a firm, for example, in tremendous detail, it would quantify and qualify what risk, meaning where it comes from and the financial impact of the organisation of any risk area. Let's take cyber or property or liability. Aon has publicly said when they put those risk analysers in front of a prospect or a customer, and I'm going to say a number, but please check me on this, but that their win rate is 40% higher when they put those risk-modelling products in front of a customer, that's material. AI is going to enable Aon. Quite frankly, it's going to enable all brokers, the smart ones anyone and the ones that are well capitalised to take that risk-modelling to another level. There's big impact to revenue generation and margin management.

That's before you even talk about as Aon provides risk-management expertise or human-capital expertise to its clients, which obviously is Aon's business. Those clients are facing risk from Aon itself. The interesting point is this issue that could trouble a broker, or AI creates risk at clients that Aon can manage. That large brokers and Aon is a good example of that. It creates opportunity for them. All of that is before you apply something like artificial intelligence and computer enabling and things like that, just how you look at and manage efficiency and effectiveness and workplace or process management within your organisation. On that earnings call a couple of weeks ago, Mr Case spoke to some of the very specific work process enhancements that Aon has made and those are things like how quickly they can process a claim or how quickly they can analyse an insurance policy or how quickly they can get a client and invoice, just basic operating things. I'm not going to state them, but he stated very specific numbers of we're going from Y to Z and here's how we're doing it. Anyway, I know I'm babbling on a little bit, so I'm going to take a break and let you ask another question.

[[00:47:36]]
With client expectations continuing to increase and the efficiencies gained by Aon with AI, how much of a risk do you see with clients pushing back on fees charged or the company's ability to lean into the risk adviser role? How do you see the impact of AI when it comes to those dynamics?

[[00:48:17]]
I think that AI is very much an arming tool. AI gives everyone, including you and me, enormous tools that can create enormous insights. The exposure to any adviser is that it puts that information and that data and analytics into the hands of anyone. It also, I don't know how to say this, it puts a client in a position of saying, "Why do I need my adviser to do this? I can do it myself or I can do it from another source." I think it is opening up a window. Is it going to be a Pandora's box, who knows, but of something that you just mentioned, which is brokerage compensation. This is not a specific Aon issue at all. It's just a brokerage industry issue about compensation and the equality of compensation and things like that. I don't know. Personally, I think that even though that can put pressure on a brokerage organisation, I think that level of transparency and even disclosure is a positive thing. Could it put a broker on the hot seat? Yes. I think what you're mentioning or alluding to is out there. You're seeing that swirl around as well.

[[00:50:51]]
Where are you seeing AI efficiencies more on the back end? How much of an opportunity is there to expand margins for Aon?

[[00:51:12]]
Aon has commented publicly about the impact of AI, and they've talked about where they're putting it into effect. They haven't talked about what their investment in it is, although the CFO has said that they've got that factored into their overall expense and investment of their 3x3 plan. I don't know. I just don't have a real good take on that one. There's no doubt, Aon is really strong at running their business. The Aon Business Services, which is the single organisation that provides all of the support services to all of the Aon business units. That was a game-changer to Aon. Aon has been very vocal and transparent about the role of ABS and the value of ABS. I think the AI ranges, if you will, of how they're going to be used will be in all facets of the organisation, but at least from my perspective, it would be first and foremost, in the hands of ABS. I think there's just a lot more improvement in automation and effectiveness of Aon's backroom. Like I said, Aon's ABS has made huge, huge steps and strides in that. I assume there's still a material opportunity for cost savings. Again, that's just my opinion. Aon talks about it, but they don't quote specific finances to it, though. I'm going to be careful with what I say.

[[00:54:23]]
From a competitive standpoint, how much of a factor is scale and size with AI? Do you see the deeper, larger datasets as a competitive advantage for Aon? Do you see AI enabling the smaller brokerages to catch up to companies such as Aon, or even at the large scale, do you see Aon in a better position than a company such as Marsh McLennan?

[[00:54:57]]
I think it's a double-edged sword. AI can benefit any insurance distribution business. I don't know any business where AI can't probably make some positive impact to it. AI can impact any insurance distribution business. I'd have to put it proportional to their size because you take a smaller brokerage organisation, they can value enormously. To be candid, some of the things the big guys have done for years, AI might give the little guy a step up in doing that. The double-edged sword is the large organisations have the capital to make those investments. The smaller organisations that could probably benefit from it more don't have that capital typically, don't have that level of capital to invest in it. Yes, they have their technology platforms and all their systems and so forth, but I think the mid-sized brokers out there. I don't mean brokers that are serving mid-sized clients, I'm talking about they're just mid-revenue-sized companies.

Let's say, you get past the top 20 US insurance brokers and you go from 20 to 100, that 80 insurance brokers. I think AI is a huge opportunity for them. Now granted, the further you go down that list toward 100 and above, probably brings up that disintermediation exposure as well. It's a big opportunity. The Aons and the Marshes and the Gallaghers, they're pounding this stuff hard and not only what it means to the revenue side, the margin side, and just the operational administration side. They're going to pound this thing into the ground.

[[00:57:48]]
How are you thinking about Aon's inorganic growth opportunity, and how do you see consolidation continuing down the road?

[[00:58:15]]
That's a big question. The interesting point is Aon has always had a material client base of middle market customers. They just didn't put that label on it. They maybe didn't build a standalone operating model around middle market. Aon is known in the buyer marketplace as a large account broker. That impacts the large broker when they're chasing middle market business that they're labelled as that and not just Aon, but anyone. Then you look at what Marsh did with the creation of MMA, their middle-market platform, which was hugely successful. Because I was at Aon at this time when Aon acquired NFP. I view that as a huge step and a very positive step by Aon. I think that was such a smart thing. Aon has been working at that middle market issue, and they talk about this publicly from two sides. What they're doing with NFP is one side of it. What they're doing around the design of the middle market business platform and segment that they had pre-NFP. All that comes together nicely.

The real advantage from my perspective of that NFP acquisition, it gives Aon the platform to use out in the M&A market to make middle market acquisitions and glue them into the organisation and do it through NFP. In fact, Aon announced one of those earlier this week. A middle-market brokerage organisation, they bought somewhere in the upper Midwest and stapled that and the NFP platform gives them the ability to do that. At that Morgan Stanley conference, the CFO talked, I think it was that, it may have been the earnings call, talked about the middle market. The way Aon views that is it's a USD 31bn market that they want more of. There's going to be more consolidation going on, there's an expectation by anybody that follows it that there will be a continuation of consolidation. A middle market is a big part of that front and centre as the whole distribution marketplace or channels are changing.

I mentioned that earlier between retail, wholesale, MGA, etc, and especially speciality markets. All of that is playing out in the M&A market. It's all driven by this, you just have to look back a few years ago when we saw this avalanche of private equity money coming into the industry. A lot of the continued consolidation and a lot of the happening of it and the pricing of it is supply and demand influenced. There's capital out there. That's from private equity. That's just not the larger brokers like the Aons and the Marshes and the Gallaghers making those acquisitions as well. I think the middle-market opportunity for Aon is large. Again, that's Matt's opinion. Aon hasn't quantified it other than say what they see as the marketplace size. Aon never gives a lot of insights into their M&A strategies. The last one I saw just is they're very disciplined at what they do.

[[01:04:29]]
Great. We are at time, so we can wrap up there. Let me close by saying thanks again for taking the time, and have a good rest of your day.

[[01:04:41]]
All right. Thank you. I appreciate you.

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