00:00Stock up a little over 2.5% year to date, down about 5% since reporting those earnings yesterday.
00:05Ed, good to have you back on the program.
00:07The company and the team, always a good read on how the business world is feeling about the current environment.
00:12When it comes to things like risk, climate, governance issues, M&A, and more, where do you think the biggest
00:19opportunity for growth is for Aon?
00:23Well, first of all, Tim, Carol, thanks for having me back here.
00:26The biggest opportunity for growth is actually what we just saw over the past two years in our three-year
00:32strategy and what we just saw in this most recent quarter with strong results.
00:36Complexity across the risk that our clients are facing is the biggest issue we're discussing with them.
00:42That's the political violence and war exposures in the Middle East.
00:46That's the hyperscalers' access to additional capacity for the AI infrastructure builds.
00:52That's working with our clients on large-scale defense projects.
00:56All of these things are coming together and intermingled on the minds of our clients.
01:02And we are providing solutions to help them with that as we give them access to our data, help them
01:07understand their risk, and then match it with capitals.
01:10And that's where we actually saw, when you look at those lines in our P&L and on our income
01:15statement, that's where you saw the growth.
01:17I don't want to be crass here, but in other words, is geopolitical uncertainty, is war, is instability good for
01:22your business?
01:24Well, it creates complexity for our clients, and that drives demand for us, and that is good for our clients
01:33and good for our shareholders as well.
01:34If you think about that geopolitical violence, you have not just the assets themselves, the ships, the cargo, but you
01:42also have supply chain risk.
01:45You have the political violence and terrorism.
01:48Those things create demand because clients want to protect their assets, and they still want to be able to invest
01:54and grow and know how to do that.
01:55We give insight, and of course, that drives more demand for our products and helps us with the growth.
02:01All right.
02:02I want to cut to the chase with you.
02:04How freaked out is the corporate community?
02:07Because there's a lot coming at them.
02:10You know, this war that just, you know, peace talks, not peace talks, more attacks.
02:17There's that.
02:18There's the higher costs of maybe doing things in your backyard in terms of production, energy costs.
02:25There's just a lot.
02:26So how freaked out is kind of the corporate community in your view?
02:31The risk has been rising.
02:33Risk has been rising, and the intermingledness of that risk, all of them connected, is creating more angst, more volatility
02:43in the P&Ls and in the balance sheets of our clients.
02:46And when these things come together, there is angst, but they still want to invest.
02:52They still want to grow.
02:53And so we have been investing.
02:55We've been investing in capabilities to do what I was saying, helping them understand their exposure, helping them connect that
03:02data to their assets and understand how it impacts their balance sheets.
03:06And then, of course, bringing in not just the traditional capital in our industry from insurance carriers, but from other
03:14players as well, so that our clients can still continue to grow.
03:18And, of course, that helps our growth as well.
03:21Is there enough, you know, if we're talking about the data center part of this conversation and the opportunity there,
03:28is there actually enough insurance capacity for all the demand that we're seeing with AI data centers?
03:35Tim, if you think about it, these data center sites, some of the clients that you'll be talking to later
03:42today and actually talked about at the beginning of your program, they're coming on at $20 billion, $40 billion, $50
03:49billion per site.
03:49The insurance industry traditionally is about a $5 trillion industry across all property, across all casualty, across health and wealth
03:59as well.
04:00And so when you bring on data centers that are of this size, it's not sufficient capital from traditional insurance.
04:07And so we've been talking for quite some time for the industry to stay relevant.
04:12We are going to need to have access to what we've sized as a $250 trillion opportunity.
04:19We just need a small slice of that to expand the addressable market.
04:23That's going to come from institutional investors.
04:25That's going to come from private equity, sovereign wealth funds.
04:29And the only way that they will enter is if we can provide the data.
04:33Just like we began this cat catastrophe bond market, which is growing at a teen rate and we're over half
04:41of it.
04:41We're seeing it with our treaty products, aggregating risk from insurance, and we're going to have to do the same
04:48thing for data centers here.
04:50Or you're going to see companies have it on their own balance sheets or go out and look to fund
04:55debt for it.
04:56But we think we certainly have interest as asset managers want assets with uncorrelated return.
05:03We are giving them the data to help them see that they can get attractive yields off of that.
05:08And we do think that we'll continue to be relevant as this extensive build, increasing investment in data centers continues
05:16over the next few years.
05:17So, Ed, as you guys know, you have all described in the past the data centers as a $10 billion
05:24premium opportunity.
05:26Is this still a reasonable amount?
05:28Has the company's view changed on it?
05:30Is it less?
05:31Is it small?
05:32Numbers matter.
05:32When we gave that estimate, the spend in 2026 was less than the $800 billion that it's estimated to be
05:39today.
05:40The infrastructure spend over the next three years will be at least $2 trillion.
05:45And when you think about the ongoing operations of that, some estimates have it as high as $5 to $7
05:50trillion.
05:51So it's only increased since then.
05:54The question is, are we going to be able, back to Tim's question, of getting the sufficient capital in to
06:00be able to ensure
06:01and manage the risk associated with it?
06:04So we're very bullish that that's going to be an opportunity, a tailwind for our growth as we move forward.
06:10And we have been making the investments on the capabilities using our data because we are, you know, one of
06:18the largest players in the industry to give the insights to these asset managers.
06:22All right.
06:22Maybe a silly question, but I'm thinking somebody at home might be listening or watching and wondering.
06:26When we talk about enough insurance capacity for AI data center demand, what exactly are we talking about?
06:33What is that insurance capacity?
06:35Well, if you have a, I mean, think about your home, you know, a million dollar home.
06:40It's just protecting the data center.
06:41Is that what it is?
06:43Well, it's protecting the data center.
06:45The build of it is protecting the operations of it.
06:49If weather comes in, cyber has an impact on it, the general liability.
06:54So it's, we actually have something that we call the data center lifecycle program, not just to build the physical
07:00facilities itself, but the ongoing operations and all the risk that it would face.
07:06You measure risk here with data centers.
07:08Our CEO likes to say you measure it in millions per minute in terms of operations.
07:13So imagine the risk associated with that and you can ensure that and we'll help match that risk with the
07:19right capital.
07:20You know, we're actually seeing a headline that's related to this crossing the Bloomberg terminal right now.
07:25DeepSeq is developing a massive artificial intelligence data center in Inner Mongolia, according to people familiar with the matter, to
07:32add one gigawatt worth of compute.
07:35The company aims to build its own facility while leasing additional capacity from other companies.
07:40It's pushing to bring at least part of its data center's capacity online by the end of next year or
07:46early 2028.
07:47Edmund, we're speaking with Edmund Rees, CFO of Aon.
07:50We're talking data centers.
07:51We're talking insurance and the insurance market for data centers.
07:55What do you think when you see a headline like this, DeepSeq developing this massive AI data center in Inner
08:01Mongolia?
08:02As you were reading it, there were three things that were going across my mind.
08:05One is the construction.
08:07Two is the energy associated with it.
08:09Another area that is high growth for us that you'll need to support this data center.
08:15And the third thing is the engineering and expertise that we have in understanding, not building that in a concentrated
08:22location, but dispersing the risk and giving insight on that.
08:26So that is a company that could definitely benefit from the insights that we provide from the data here as
08:34they pursue what is going to be a massive investment and ensure that they get the returns that they want
08:39on it.
08:40Well, let me just go there then.
08:41Are you working with DeepSeq?
08:42Are you working with Amazon, Meta, Microsoft?
08:46Do you smile for those who are listening on radio?
08:48I will smile and say that we are, you know, given what we have, we have strong relationships across the
08:54hyperscalers.
08:55I, of course, can't talk about any specific company here.
08:59But increasingly, the expertise and the engineering advice, I think I mentioned on this program before that even before the
09:07large data center boom here,
09:09we had advised on over 30% of the data center builds in the U.S., which is much larger
09:15than any other country.
09:16You have to go to China and Germany before you start to see the next, and we have high market
09:20share there as well.
09:21So imagine all the engineering expertise that we have, understanding where to put the sites, how to build them, how
09:28to ensure them themselves.
09:30And so with that expertise, I think it drives more demand for us, and we are, in fact, working with
09:35many of the large hyperscalers that you talk about on the show.
09:39Just real quickly, any signs that this stuff is slowing down?
09:42Because this is the big question, or one of the big questions.
09:45Any signs that you're like, oh, this, you know, insurance capacity for AI data center demand, it's going to slow
09:51down?
09:52Any signs of that?
09:54Carol, the last five quarters, I got on our earnings call and said that we had double-digit growth in
10:01construction, which is where this shows up, including this quarter here.
10:06Now, that is a, you know, it's not, we drive growth broad-based through many different product lines, so we're
10:13not overweighted to this,
10:14but it has been a strong contributor for us, and we see it to be a tailwind as we move
10:20forward here.
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