Aon plc (AON)
Servicios financieros / Corretaje de seguros y consultoría de capital humano
Aon is a global risk brokerage and human capital consulting firm, with scale across more than 120 countries and an extremely diversified client base (the largest client accounts for barely ~1% of revenue). Return on invested capital of 15.7% comfortably clears the 10% bar, though the balance sheet carries the goodwill of decades of acquisitions —including NFP— and that should not read as poor quality. It trades near fair value: the normalized entry multiple is already at the high end of the sector band, and the thesis's margin depends on the guided margin expansion materializing.
Moat Compounder estimates the intrinsic value of Aon plc (AON) at $437 per share on a five-year horizon. With the stock at $274.78 at 2026-10-12 close, the expected total return is 11.0% per year: undervalued. The analysis draws on 10-K FY2025 and 8-K (Q2 2026 results). Analysis dated 2026-07-29.
- Price
- $274.78
- Intrinsic value (5y, base)
- $437
- Total annual return (5y)
- 11.0%
- Status (nominal)
- Undervalued
- Margin of safety
- +26%
The essentials
- Return on invested capital of 15.7% (excellent against the 10% bar), despite negative tangible equity from the accumulated goodwill of decades of acquisitions — the serial acquirer nuance, not a sign of poor quality.
- Guidance reaffirmed on July 29, 2026: mid-single-digit or higher organic growth and 70-80 basis points of adjusted operating margin expansion, with the NFP integration substantially complete by the close of the second quarter.
- Reported growth (4.9% TTM) is temporarily depressed by the sale of NFP's Wealth business in the fourth quarter of 2025; organic growth runs at 5-6% and is the clean measure of the underlying business.
Intrinsic value — two valuation methods
Total return at 5 years: 11.0%/year = 9.7% appreciation + 1.3% dividend. The target price ($437) is ex-dividend; the $22 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $414 · Multiples $370) exceeds the market price ($275).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $275 trades ~25.7% below its value discounted to today (~$370); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — Infravalorado: the target price ($437) plus dividends yield above the required average return (10%) — the business compounds.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$232.
Thesis
The business
Aon is a global risk brokerage and human capital consulting firm, with scale across more than 120 countries and an extremely diversified client base — the largest client accounts for barely ~1% of revenue. Return on invested capital of 15.7% comfortably clears the 10% bar, a solid result for a company whose balance sheet carries the goodwill of decades of acquisitions, including NFP, without that being read as poor quality: the numerator grows while the denominator carries the price paid for past inorganic growth.
Guidance reaffirmed on July 29, 2026 —mid-single-digit or higher organic growth and 70-80 basis points of adjusted operating margin expansion— anchors the projection path, with the NFP integration substantially complete freeing up margin as its integration costs dilute away. Reported TTM growth (4.9%) is temporarily depressed by the sale of NFP's Wealth business in the fourth quarter of 2025; organic growth —the clean measure— runs at 5-6%.
The valuation
Valued at the enterprise level on EV/NOPAT over after-tax operating income, with an exit multiple of 19× in the middle of the insurance-broker archetype band [16-22×]. The 5-year value comes from projecting the guided revenue and margin path, applying the terminal multiple to the year-5 result, with the observed share buyback pace modeled explicitly rather than accumulating cash.
The estimated total return over 5 years, combining appreciation and dividend, is +11% against the 10% bar.
The margin of safety
It trades at a real discount to value, though short of the required margin of safety. The normalized entry multiple —excluding the extraordinary gain from the sale of NFP Wealth— is already at the high end of the sector band, so much of the thesis's margin depends on the guided margin expansion materializing as expected.
What to watch
The central disconfirmer is structural: the migration from variable commission to fixed fee, which decouples revenue from the insurance pricing cycle, and pressure from insurers and capital markets seeking to place risk directly with the client, without an intermediary. Neither has compressed the operating margin so far, but they are the test that would invalidate the thesis if they accelerate.
Educational / informational. Does not constitute investment advice.
Valuation by multiples
The forward value is divided by the projected shares (fewer, after the buyback financed with cash flow), not today's — dividing the same value among fewer shares raises the value per share. This is the buyback modeled directly — the share-count path from the year-by-year model — not a piece added separately.
Discounted cash flow to present value (DCF)
Normalized net income (ex gain on the sale of NFP Wealth) + D&A − maintenance capex − ΔNWC — a normalized cash-generation power that deliberately differs from the raw net income (netMargin × revenue) that feeds the P/E cascade, because it adds back the non-cash amortization of NFP intangibles and subtracts real maintenance capex and the change in working capital as the base. Move the assumptions: the value recalculates live. The verdict remains anchored by multiples; the DCF contrasts it at present value.
Risk does not inflate the rate: protection is required separately, as a margin of safety over the value. The floor avoids discounting at the pace of a depressed market rate.
| Year | Projected FCF | Discount factor | Present value |
|---|---|---|---|
| 1 | $3.3 bn | 0.957 | $3.1 bn |
| 2 | $3.5 bn | 0.916 | $3.2 bn |
| 3 | $3.7 bn | 0.876 | $3.2 bn |
| 4 | $3.9 bn | 0.839 | $3.2 bn |
| 5 | $4.1 bn | 0.802 | $3.3 bn |
Reverse DCF — what growth the price discounts
The inverse approach: instead of projecting growth to obtain the value, the market price ($275) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.
The market discounts less growth (-3.5%/year) than we project (5.5%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.
That growth implies ~$2.6 bn of owner earnings in year 5 (vs ~$4.1 bn of our base case). It recalculates if the DCF assumptions are edited.
Year-by-year model
Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on NOPAT (EV/NOPAT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.
| US$ bn | TTM | +1a | +2a | +3a | +4a | +5a |
|---|---|---|---|---|---|---|
| Operation (editable: revenue, margins, capex, D&A) | ||||||
| Revenue | 17.577 | 18.54 | 19.56 | 20.59 | 21.64 | 22.72 |
| growth | — | +5% | +6% | +5% | +5% | +5% |
| OCF | 3.5 | 3.8 | 4.1 | 4.3 | 4.6 | 4.9 |
| OCF margin | 20.1% | 20.5% | 20.8% | 21.0% | 21.2% | 21.4% |
| Total capex | 0.283 | 0.3 | 0.315 | 0.33 | 0.345 | 0.36 |
| Maintenance capex | 0.3 | 0.3 | 0.3 | 0.3 | 0.3 | 0.4 |
| Growth capex | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| EBIT | 4.7 | 5.1 | 5.5 | 5.9 | 6.3 | 6.7 |
| EBIT margin | 26.5% | 27.3% | 28.0% | 28.6% | 29.1% | 29.5% |
| NOPAT | 3.7 | 4.0 | 4.3 | 4.6 | 5.0 | 5.3 |
| D&A | 0.894 | 0.85 | 0.8 | 0.75 | 0.71 | 0.68 |
| Cash flow (the two versions) | ||||||
| FCF growth (OCF − total capex) | 3.2 | 3.5 | 3.8 | 4.0 | 4.2 | 4.5 |
| FCF maintenance (OCF − maintenance capex) | 3.2 | 3.5 | 3.8 | 4.0 | 4.2 | 4.5 |
| Owner earnings (NOPAT + D&A − maintenance capex) | 3.0 | 3.2 | 3.6 | 3.9 | 4.2 | 4.5 |
| EV and multiples (compressed by the growth of the metric) | ||||||
| Cash | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| EV (MktCap − Cash + Debt) | 72.5 | 72.5 | 72.5 | 72.5 | 72.5 | 72.5 |
| EV / FCF growth | 22.3x | 20.7x | 19.3x | 18.1x | 17.1x | 16.1x |
| EV / FCF maintenance | 22.3x | 20.7x | 19.3x | 18.1x | 17.1x | 16.1x |
| EV / Owner earnings | 24.5x | 22.3x | 20.4x | 18.7x | 17.4x | 16.1x |
| EV / NOPAT | 19.8x | 18.2x | 16.8x | 15.6x | 14.6x | 13.7x |
| EV / EBIT | 15.6x | 14.3x | 13.2x | 12.3x | 11.5x | 10.8x |
| EV / Sales | 4.1x | 3.9x | 3.7x | 3.5x | 3.3x | 3.2x |
| Shares and shareholder return | ||||||
| Dividend / share | $3.28 | $3.61 | $3.97 | $4.37 | $4.80 | $5.28 |
| Shares (M · buyback/dilution) | 213.9 | 210.7 | 207.5 | 204.4 | 201.3 | 198.3 |
| net change (− buyback / + dilution) | — | -1.5% | -1.5% | -1.5% | -1.5% | -1.5% |
| Buyback in $ (current buyback, grows with FCF) | $1.6 bn | $1.7 bn | $1.8 bn | $2 bn | $2.1 bn | $2.2 bn |
| Value curve (value/share at exit multiple by year) | ||||||
| Value / share (target price) | — | $314 | $350 | $387 | $413 | $437 |
| Total return vs price | — | (-11%) | (-0%) | (+4%) | (+5%) | (+5%) |
Aon is a risk broker and human capital consultant — a commission and fee business, capital-light, with no portfolio of its own and no underwriting risk. It is valued at the enterprise level, on a multiple of after-tax operating income: the metric is pre-interest, so the cash (US$1.5 billion) and the debt (US$15.0 billion) enter the bridge and the funding is charged only once. The path starts from the guidance reaffirmed in the release of 29-Jul-2026: mid-single-digit or better organic revenue growth and 70-80 basis points of adjusted operating margin expansion for fiscal year 2026, with organic growth running at 5-6% in recent quarters (6% in 2025, 5% in the second quarter and in the first half of 2026). Reported TTM growth (4.9%) is depressed by a technical and transitory drag: the sale of NFP's Wealth business in the fourth quarter of 2025 subtracts ~4 percentage points from the year-over-year comparison while the twelve-month cycle completes; that drag fades toward the end of 2026 and reported growth converges to organic. Year 1 of the base case = 5.5%, barely above recent organic growth, reflecting that convergence. The operating margin (EBIT) starts from the TTM's 26.48% and expands toward ~29.5% by year 5, faster than the guided 70-80 basis points on the adjusted base because the costs of the Accelerating Aon United Program and the NFP integration costs —which do hit the GAAP margin and not the adjusted one— are finishing fading (the NFP integration was "substantially complete" at the close of the second quarter of 2026, per the release itself). Capex split note: TTM depreciation and amortization (~0.894bn) far exceeds TTM capex (~0.283bn) because most of that D&A is non-cash amortization of intangibles bought in the NFP acquisition (brands, customer relationships), not wear on physical assets that must be replaced with capex. That is why maintPct is set at 1.0 (total capex is already entirely maintenance; there is no identifiable growth capex in a services business that scales with people, not with fixed assets) and owner earnings end up above GAAP net income by the magnitude of that non-economic amortization. TTM net income (US$3,914M) includes an extraordinary gain of ~US$1,199M pre-tax from the sale of NFP's Wealth business in the fourth quarter of 2025 (plus an additional US$20M recognized in the first quarter of 2026); the year-0 net margin (16.85%) is normalized by excluding that gain and applying the TTM effective rate. Year-0 ΔNWC (US$0.455bn) is derived from the change in receivables and other non-fiduciary current assets/liabilities between 2024 and 2025 (fiduciary assets and liabilities cancel each other out and contribute no net working capital). Share repurchases are modeled with an explicit sharesPath (cash is not accumulated): the recent revealed pace post-NFP integration is approximately -1.5%/year in diluted shares (213.9M in the second quarter of 2026 against 217.3M a year earlier), a deliberately more conservative pace than the quarterly buyback target the company has just exceeded (US$600M in the second quarter of 2026 against an annual target of at least US$1,000M), following the rule of "when in doubt, less buyback". The base exit multiple (19×) falls in the middle of the insurance brokerage archetype band [16-22×], reflecting a ROIC of 15.7% (excellent against the 10% bar) and a wide, stable moat, mitigated by the penalty for moderate terminal growth (~5%) and by structural competition (migration to fixed fees, insurers seeking to go direct to the client).
Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.
Scenarios (bear / base / bull) — at 5 years
Value sensitivity
Value per share by growth scenario (rows) and the compression or expansion of the exit multiple (columns). The color shows whether it beats the required return.
| Growth ↓ / Multiple → | Compression−15% | Base multiple | Expansion+15% |
|---|---|---|---|
| BearStresses year 1 below guidance: 3.5% instead of the 5.5% guided · base 16× EV/NOPAT, the floor of the insurance-broker archetype band [16-22×] | $239 -1.1% | $281 2.0% | $323 4.8% |
| BaseStarts at 5.5% (year 1) · base 19× EV/NOPAT, mid-tier of the band [16-22×] on the 15.7% ROIC and the wide, stable moat | $371 7.6% | $437 11.0% · base case | $503 14.1% |
| BullLonger runway: 7.0% in year 1 (the "or higher" guidance materializing) sustained by additional bolt-ons in Human Capital · base 21× EV/NOPAT, near the top of the band on sustained growth and margin | $468 12.5% | $551 16.1% | $634 19.3% |
Multiples — today
High today = growth is being paid for; they cheapen toward 3 and 5 years (see Projections).
Forward multiples
With today's price fixed and the metric growing, what multiple is being paid at 3 and 5 years. Today's high multiple is the price of growth: if the business grows, the entry multiple cheapens on its own.
Optionalities
They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.
The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).
Maximum price to pay today — by required return
Each card fixes a required annual return and answers: if the business is worth $437 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $275, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.
Return and margin of safety calculator
The maximum price to pay today to earn the required return, with the dividend collected as a separate flow. Both controls are editable.
With a target price of $437 in 5 years plus $22 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $370. Against the current market price ($275), the margin of safety is 25.7% (trades below the maximum → there is margin) and the total return at that price would be 11.0% annually.
Valuation quality
- Normalized entry multiple. On earnings ex extraordinary gain, already at the high end of the archetype band.
- Estimated total return over 5 years. +11%, with the dividend contributing a growing share via IRR.
- Margin of safety. It trades at a real discount to value, though short of the required margin of safety.
ROIC vs the 10% bar — the compounding engine
The quality bar — return bands
The return on capital is judged against absolute bands; the value-creation floor is the market's opportunity cost (~10%). A stock's volatility does not measure business risk.
ROIC 16% → excellent (15-20%). The bar is a measure of business quality, not the method's discount rate: value is discounted to today at the risk-free rate, and protection is required separately, as a margin of safety.
Owner earnings — the waterfall
It charges maintenance capex (which EBITDA does not deduct). The growth capex ($0 bn) is voluntary and is not charged to the base — it depresses FCF today, creates value tomorrow.
Cash & reinvestment
Margins — trajectory
Each margin over sales, year by year: historical (solid line) → projection (dotted).
Owner earnings — the detail
Business quality
- ✓ ROIC exceeds the cost of capital (~10%)
- ✓ High incremental ROIC (compounding)
- ✓ CFROIC backs up the ROIC (104%, cash vs. accruals)
- ✓ Healthy balance sheet (low corporate debt)
- ✓ Durable competitive moat (multiple advantages)
Quality — cash · ROIC · reinvestment
- ROIC vs the 10% bar. 15.7%, in the excellent tier, though invested capital carries the goodwill of decades of M&A.
- Cash conversion. TTM FCF (~3.25bn) comfortably covers the dividend and buybacks without additional leverage.
- Quality of reported earnings. TTM GAAP includes an extraordinary gain of ~US$1,200M from the sale of NFP Wealth; the base case uses normalized earnings.
Revenue trajectory
Values in US$ bn. The % over each bar is the year-over-year (YoY) growth — each year, historical and projected, vs the prior one (the TTM vs the TTM from a year ago). The path comes from the same source as the table; years without their own series in the model are interpolated between the anchors. Historical solid, projection in a lighter shade.
Where the growth comes from · by segment
Weight in revenue and year-over-year (YoY) growth, in reported USD.
Weights on second-quarter 2026 revenue; organic growth (not reported growth) was uniformly 5% across the four lines that quarter — Wealth Solutions shows a reported -18% from the sale of NFP's wealth business, but its underlying organic growth was also 5%.
Growth engine — operating drivers
Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.
Aon is a commissions-and-fees business, not one of physical volume: there are no units or subscribers to report, and the relevant KPIs are revenue by service line, the pace of share buybacks, and the adjusted operating margin (the non-GAAP metric the company itself uses to guide and compensate). Organic growth —which excludes foreign exchange, acquisitions, divestitures, and fiduciary financial income— is the cleanest driver of the underlying business, and it ran at 5-6% over the last five reported quarters.
Projections
| Metric | FY23 | FY24 | FY25 | TTM | +1A | +2A | +3a | +4A | +5a |
|---|---|---|---|---|---|---|---|---|---|
Revenue | $13.4 bn | $15.7 bn (+17%) | $17.2 bn (+9%) | $17.6 bn (+5%) | $18.5 bn (+5%) | $19.6 bn (+6%) | $20.6 bn (+5%) | $21.6 bn (+5%) | $22.7 bn (+5%) |
EBIT | $3.8 bn | $3.8 bn (+1%) | $4.3 bn (+13%) | $4.7 bn (+15%) | $5 bn (+8%) | $5.4 bn (+8%) | $5.9 bn (+8%) | $6.3 bn (+7%) | $6.7 bn (+7%) |
Net income | $2.6 bn | $2.7 bn (+4%) | $3.7 bn (+39%) | $3.9 bn (+50%) | $3.2 bn (+10%) | $3.6 bn (+10%) | $3.9 bn (+9%) | $4.2 bn (+8%) | $4.5 bn (+8%) |
FCF (OCF − capex) | $3.2 bn | $2.8 bn (-11%) | $3.2 bn (+14%) | $3.2 bn (+12%) | $3.5 bn (+8%) | $3.8 bn (+7%) | $4 bn (+6%) | $4.2 bn (+6%) | $4.5 bn (+6%) |
Total dividends | $0.5 bn | $0.6 bn (+15%) | $0.6 bn (+12%) | $0.7 bn (+10%) | $0.7 bn (+11%) | $0.8 bn (+11%) | $0.9 bn (+11%) | $1 bn (+8%) | $1 bn (+8%) |
The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).
Growth quality
- Organic growth. 5-6% sustained over the last five quarters, the clean measure of the business.
- Reported growth. 4.9% TTM, depressed by the technical drag from the sale of NFP Wealth.
- Organic reinvestment runway. Limited: future growth depends more on bolt-on M&A and share gains than on capex.
Moat strength
The business and its moat
What it does and how it makes money
Aon does not insure risk: it places and advises on it. It earns brokerage commissions (a function of the premium amount and the services rendered), consulting fees, and compensation from insurers/reinsurers for placement and administration services. The Risk Capital segment (US$11,290M in revenue in 2025, ~66% of the total) groups Commercial Risk Solutions —commercial brokerage by industry and product: property, liability, financial lines, construction, transportation, energy, cyber— and Reinsurance Solutions —treaty and facultative, plus an investment-banking-style capital markets business specialized in raising capital and insurance-linked instruments. The Human Capital segment (US$5,907M, ~34%) groups Health Solutions —health benefits and talent consulting— and Wealth Solutions —retirement consulting and delegated investment management, following the sale of NFP's wealth business in the fourth quarter of 2025.
Additionally, Aon holds client fiduciary funds in transit (premiums headed to insurers, claims headed to policyholders) in segregated accounts that generate financial income, without that principal being available for its own operations — it is third-party funding, not the company's own working capital.
Scale and competitive position
Aon competes with Marsh McLennan, Willis Towers Watson, Arthur J. Gallagher, and Lockton in a fragmented global market, alongside insurers seeking to sell directly and consultancies/InsurTechs attempting to disintermediate the broker with artificial intelligence. The client base is extremely diversified: the largest client represented ~1% of 2025 revenue, and no insurer accounts for more than 10% of placed premiums — a structure that cushions isolated sector or geographic shocks.
The acquisition of NFP (2024) expanded the presence in the U.S. middle market and is already substantially integrated as of the close of the second quarter of 2026, with integration costs finishing their dilution from results. The sale of NFP's Wealth business in the fourth quarter of 2025 (US$2,300 million in cash) refocused the Human Capital segment on health benefits and talent consulting.
The moat: why it is hard to compete
Aon's moat combines global scale (placement hubs in London, Bermuda, and Singapore that allow multinational clients to be served in an integrated way), proprietary risk-placement data and analytics accumulated over decades, and regulatory barriers to entry (jurisdiction-specific brokerage licenses across more than 120 countries). Long-term advisory relationships generate real switching costs for the client — replacing the broker of record means giving up placement history, loss data, and coverage continuity — though those costs are not prohibitive: the 10-K itself notes that clients increasingly engage multiple brokers for different portions of their account, which partially dilutes this advantage.
Moat direction and threats
The moat reads as stable: scale and client diversification are not eroding, but they are not widening rapidly either — this is a mature professional-services business, not a network-effect platform. There are two structural threats: the migration from variable commission (a percentage of premium) to a fixed fee among large clients, which decouples revenue from the insurance pricing cycle but also from the upside when rates rise; and pressure from insurers and capital markets seeking to sell or transfer risk without a traditional intermediary. Neither has compressed the operating margin so far — it is in fact expanding — but they are the central disconfirmer of the thesis over the medium term.
Business / sector quality
- Revenue recurrence. Commissions and fees on long-term advisory relationships, with high retention.
- Client diversification. Largest client ~1% of revenue; no insurer accounts for more than 10% of placed premiums.
- Capital-light. TTM capex is barely ~1.6% of revenue; the business scales with people, not fixed assets.
- Exposure to the insurance pricing cycle. Part of variable revenue follows the premium cycle, currently softening in some lines.
- Structural competition. InsurTechs and insurers seeking to disintermediate the broker with artificial intelligence.
Solvency margin
Each pillar between danger and solid — the further right, the more room.
The cushion against the contraction phase of the cycle: the further right each pillar sits, the more room before solvency is compromised.
Net cash position
Cash + liquid investments − debt. The backstop that supports the balance sheet during the contraction phase of the cycle.
Debt composition
Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).
Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.
Company health / solvency
- ✓Leverage (net debt / EBITDA)Net cash $0 bn
- !Interest coverage (EBIT / interest)6.2x
- –Liquidity (current ratio)no data
- ✓Cash quality (CFROIC vs ROIC)CFROIC backs 104% of ROIC
- ✓Value creation (ROIC − 10% bar)+6pp
- ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.3x — no over-investment
- !Float / working capitalConsumes cash $0.5 bn (positive WC)
- ✓Dilution (SBC % of revenue + shares)SBC 2.1% of revenue
A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.
Health — balance sheet risks
- Leverage. Debt of ~US$15,000M, with financial covenants tested quarterly and an investment-grade rating.
- Interest coverage. TTM EBIT (4.65bn) covers interest expense (~0.76bn TTM) with ample margin.
- Liquidity. Cash and equivalents plus short-term investments of ~US$1.27bn as of the second quarter of 2026.
Who runs it
- Greg Case is president and chief executive officer, and publicly leads the Aon United strategy accelerated by the 3x3 plan.
- The integration of the NFP acquisition (closed in 2024) was declared substantially complete as of the close of the second quarter of 2026, in line with the communicated timeline.
- The Accelerating Aon United program (restructuring focused on technology and workforce optimization) generated net restructuring savings of US$25 million in the second quarter of 2026 and remains ongoing.
Capital allocation — indicators
The quality test: it reinvests at 16% vs the 10% bar (market opportunity cost) → each $1 retained creates value.
Shares — ownership and dilution
Minimal dilution: SBC represents less than 2% of value per year and the share count is ~flat — it does not erode value per share.
Management / capital allocation
- Strategy execution. Aon United and the 3x3 plan have been meeting the margin guidance quarter after quarter.
- NFP integration. Declared substantially complete as of the close of the second quarter of 2026, in line with the timeline.
- Ownership transparency. The proxy could not be reconciled due to the dual-class structure; a declared gap.
Why it is cheap
- Partial missing buyers: reported growth (4.9% TTM) looks mediocre against organic (5-6%) because of the technical drag from the sale of NFP's Wealth business, and part of the market may be extrapolating that headline without adjusting for organic.
- One-off motivated sellers: TTM GAAP net income is inflated by an extraordinary gain of ~US$1,200 million (sale of NFP Wealth), which can generate conflicting perceptions depending on which figure each market participant looks at.
- However, on normalized earnings (ex gain), the entry multiple is already at the high end of the sector band — the opportunity, if any, is narrow and depends on the guided margin expansion being delivered.
There is no compelling source of discount: the current price already reflects much of the business's quality, and the thesis's margin is narrow.
Return asymmetry — risk/reward
The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.
Even in the bear scenario, the return holds at +2%/year (+11% total): the margin of safety protects the downside. The bull (+16%/year, +111% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.
Bear case — disconfirmation
- The migration from variable commission to fixed fee accelerates faster than expected, decoupling revenue from the insurance pricing cycle just as that cycle hardens.
- Insurers and capital markets advance in placing risk without a traditional intermediary, eroding the placement volume that today flows through Aon.
- Savings from the Accelerating Aon United program fail to offset compensation and technology inflation, and the operating margin stalls instead of expanding.
- A softening cycle in commercial insurance and reinsurance pricing reduces placed premiums and, with them, Aon's commission.
- The debt level (~US$15,000 million) and its financial covenants limit flexibility to sustain the current pace of buybacks if cash flow deteriorates.
Bull case — the thesis for
- The "or higher" guidance materializes: organic growth runs above 6% sustained by Aon Business Services and additional bolt-ons in Human Capital.
- Savings from Accelerating Aon United and the full NFP integration expand the operating margin faster than guided, exceeding the 70-80 basis point range.
- A hardening of the reinsurance/commercial insurance cycle raises the variable commissions still in effect in the book.
- The pace of share buybacks holds or accelerates as free cash flow grows at a double-digit rate, compressing the share count faster than modeled.
- Artificial intelligence applications in placement and underwriting generate additional operating leverage not incorporated in the base case.
Risks — what breaks the base case
- Migration to fixed fee. Decouples revenue from the insurance pricing cycle, with an ambiguous impact depending on the cycle phase.
- Disintermediation. Insurers and capital markets seeking to place risk directly with the client.
- Litigation and E&O. Includes contingencies related to Vesttoo Ltd. transactions.
- Foreign exchange. More than half of consolidated revenue is generated outside the United States.
Lenses — the value investing thinkers
Each thinker's analytical framework applied to our data.
Full alignment: both the business and the price work in your favor.
- Buffett / Graham Quality + margin of safety
A wide moat and ROIC 16% above the 10% bar, but the margin is limited (+26%) → excellent business at a fair price.
- Peter Lynch Growth at a reasonable price (GARP)
A stalwart growing 6% at a multiple/growth of 3.6 → expensive for its growth.
- Joel Greenblatt Cheap and high-return (Magic Formula)
Earnings yield 8% (EBIT/EV) + ROIC 16% → brushes the Magic Formula.
- Howard Marks Perception vs reality + cycle
The price discounts -3% vs our 6%: perception is more pessimistic than reality, with an identified source of the discount.
- Seth Klarman Capital protection (bear scenario)
Bear-scenario floor +0%/yr, bull-scenario ceiling +15%/yr over 5y → capital protected, asymmetry in your favor.
- Pat Dorsey Moat strength (Five Rules)
A wide moat, stable; sources: intangibles, efficient scale, cost advantage, switching costs → passes the Five Rules.
- Aswath Damodaran Expectations implied by the price
Justifying the price requires discounting -3%, within what we project (6%) — the story squares with the numbers.
