# Aon (AON) Financial Model Free Excel 3-statement financial model and company analysis for Aon. - Canonical: https://finamodel.com/companies/aon - Industry: Insurance - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/AON.xlsx ## Model Purpose This model provides a comprehensive equity valuation and capital allocation forecast for Aon plc, enabling an analyst to assess the impact of organic revenue growth, operating margin expansion driven by the Aon Business Services platform, and the deleveraging trajectory following the recent NFP acquisition. ## Company Overview Aon plc is a leading global professional services firm providing a broad range of risk, retirement, and health solutions. The company acts primarily as an advisor and insurance broker, helping clients mitigate risk and manage human capital without taking on insurance underwriting risk itself. Business segments include: * **Risk Capital** (approx. 63% of revenue): Comprises Commercial Risk Solutions (retail brokerage, cyber, captives) and Reinsurance Solutions (treaty and facultative reinsurance brokerage). * **Human Capital** (approx. 37% of revenue): Comprises Health Solutions (health and benefits brokerage) and Wealth Solutions (retirement consulting, pension risk transfer, and investment advisory). Aon operates globally, with significant revenue concentration in the Americas, EMEA, and APAC regions. The business model is highly asset-light, fee-based, and characterised by recurring revenues with client retention rates consistently in the mid-90s percentage range. Aon holds a top-tier competitive position, operating in a global oligopoly alongside Marsh McLennan and Willis Towers Watson. A major recent event was the $13.0 billion acquisition of middle-market specialist NFP, which closed in April 2024, followed by the strategic divestiture of NFP's Wealth business to Madison Dearborn Partners for $2.7 billion in late 2025 to refocus on core capabilities and accelerate debt paydown. ## Revenue Deep Dive ### Commercial Risk Solutions (Risk Capital) * **Revenue driver formula**: Insured Values x Premium Rates x Brokerage Commission Rate. * **Historical growth rate**: 4% to 6% organic CAGR. * **Key growth levers and headwinds**: Driven by global GDP growth, inflation (which increases insured values), and P&C insurance pricing cycles (hard vs. soft markets). * **Pricing dynamics**: Primarily commission-based (percentage of premium) with a growing mix of fixed-fee advisory mandates. * **Revenue recognition notes**: Recognised on the effective date of the insurance policy. * **Seasonality**: Q1 and Q4 are typically stronger due to the timing of insurance policy renewals (January 1 and December 31). ### Reinsurance Solutions (Risk Capital) * **Revenue driver formula**: Ceded Premiums x Reinsurance Commission Rate + Capital Markets Advisory Fees. * **Historical growth rate**: 6% to 9% organic CAGR. * **Key growth levers and headwinds**: Driven by frequency and severity of natural catastrophes, alternative capital inflows (catastrophe bonds), and primary insurers' need for capital relief. * **Pricing dynamics**: Commission-based on treaty placements, plus fees for catastrophe modelling and investment banking services. * **Revenue recognition notes**: Recognised on the effective date of the reinsurance treaty. * **Seasonality**: Highly seasonal, with a massive spike in Q1 (January 1 treaty renewals) and a secondary peak in Q3 (July 1 renewals). ### Health Solutions (Human Capital) * **Revenue driver formula**: Number of Covered Employees x Fee per Employee / Commission Rate. * **Historical growth rate**: 5% to 7% organic CAGR. * **Key growth levers and headwinds**: Healthcare cost inflation, corporate headcount growth, and the complexity of employee benefits administration. * **Pricing dynamics**: A mix of commissions from health insurers and direct advisory fees from corporate clients. * **Revenue recognition notes**: Recognised over the policy period or as advisory services are rendered. * **Seasonality**: Q4 is the strongest quarter due to annual open enrolment periods for employee benefits. ### Wealth Solutions (Human Capital) * **Revenue driver formula**: Assets Under Management/Advisement x Basis Point Fee + Project Consulting Fees. * **Historical growth rate**: 2% to 4% organic CAGR (adjusted for the late 2025 NFP Wealth divestiture). * **Key growth levers and headwinds**: Equity and fixed income market performance, regulatory changes in pension funding, and the shift from defined benefit to defined contribution plans. * **Pricing dynamics**: AUM-based fees and fixed-fee actuarial consulting. * **Revenue recognition notes**: AUM fees recognised over time; consulting fees recognised as performance obligations are met. * **Seasonality**: Relatively evenly distributed, though Q4 can see spikes in discretionary project work. ### Fiduciary Investment Income * **Revenue driver formula**: Average Fiduciary Funds Held x Average Short-Term Interest Rate. * **Historical growth rate**: Highly volatile, directly correlated with central bank interest rate cycles. * **Key growth levers and headwinds**: Global interest rates and the volume of premiums processed. * **Pricing dynamics**: Purely a function of market yields on short-term, high-quality investments. * **Revenue recognition notes**: Recognised as interest is earned. * **Seasonality**: Tracks the seasonality of Commercial Risk and Reinsurance premium collections. ## Cost Structure ### Variable Costs / COGS Aon does not report traditional COGS. As a professional services firm, its primary direct cost is the compensation of its brokers and consultants, which is reported within operating expenses. ### Operating Expenses * **Compensation and Benefits**: The largest expense, typically running at 50% to 53% of total revenue. This includes base salaries, performance bonuses, and stock-based compensation. It scales somewhat linearly with revenue, though Aon achieves operating leverage through its Aon Business Services (ABS) platform. * **Information Technology**: Represents 4% to 5% of revenue. Covers cloud infrastructure, data analytics platforms, and software licences. * **Premises**: Represents 2% to 3% of revenue. Covers global office leases. This has been shrinking as a percentage of revenue due to real estate rationalisation. * **Depreciation & Amortisation**: Typically 4% to 6% of revenue. Heavily skewed towards the amortisation of intangible assets acquired through M&A (such as the NFP deal). * **Restructuring / One-time charges**: Frequent. Aon regularly implements "Accelerating Aon United" restructuring programmes to optimise workforce and real estate, generating significant add-backs to GAAP earnings. ### Margin Profile * **Adjusted Operating Margin**: Expanded from 31.5% in FY2024 to 32.4% in FY2025. * **Margin trend**: Consistently expanding by 50 to 100 basis points annually. This is driven by the ABS platform centralising middle and back-office functions, plus the realisation of cost synergies from the NFP integration. * **Segment-level margins**: Aon does not formally disclose adjusted operating margins by segment, managing the business on a consolidated "Aon United" basis. ## Balance Sheet Structure * **Total assets**: Approximately $35 billion to $40 billion. * **Key asset categories**: The balance sheet is dominated by Goodwill and Intangible Assets (arising from the NFP and Hewitt acquisitions) and Fiduciary Assets. * **Fiduciary Assets and Liabilities**: Aon collects premiums from clients before remitting them to underwriters. These funds are held as Fiduciary Assets (cash and short-term investments) with an exactly offsetting Fiduciary Liability. This inflates the balance sheet but represents client money, not corporate cash. * **Working capital profile**: * Days Sales Outstanding (DSO): 60 to 75 days. * Days Payable Outstanding (DPO): 30 to 45 days. * Net working capital is typically negative when excluding fiduciary items, meaning Aon funds its growth efficiently. * **PP&E**: Minimal (less than 3% of assets), consisting mostly of leasehold improvements and IT equipment. * **Right-of-use assets**: Material due to the global office footprint, typically representing $1.0 billion to $1.5 billion. ## Capital Expenditure & Investment * **Capex as % of revenue**: Very low, typically 1.0% to 1.5% of revenue. * **Maintenance vs. growth**: The majority is growth capex directed towards capitalised software development for data analytics and the ABS platform. * **M&A pattern**: Aon is a serial acquirer. It executes frequent bolt-on acquisitions and occasional transformational deals (like the $13.0 billion NFP acquisition in 2024). * **Typical acquisition multiple**: Middle-market brokerages are typically acquired at 12x to 15x EBITDA post-synergies. ## Debt & Capital Structure * **Total debt**: Increased significantly in 2024 to fund the NFP acquisition, but Aon paid down $1.9 billion in 2025, bringing total debt to approximately $14 billion. * **Debt/EBITDA ratio**: The company targets a leverage ratio of 2.8x to 3.0x. As of Q4 2025, leverage sits at 2.9x. * **Credit rating**: Investment grade (Baa2 with Moody's, A- with S&P). * **Key debt instruments**: Senior unsecured notes across a range of maturities, supported by a multi-currency revolving credit facility. * **Interest rate profile**: Predominantly fixed-rate bonds, with a weighted average cost of debt around 4.5% to 5.0%. * **Share repurchase programme**: Highly active. Aon repurchased $1.0 billion in shares during 2025 and uses free cash flow remaining after M&A and dividends to buy back stock. * **Dividend policy**: Modest yield (around 0.8% to 1.0%), but the dividend per share grows consistently at a high single-digit rate annually. ## Cash Flow Characteristics * **Operating cash flow conversion**: Very strong. OCF to Net Income conversion is typically greater than 1.2x due to high non-cash D&A and stock-based compensation. * **Free cash flow margin**: FCF was $3.2 billion in FY2025 on $17.1 billion of revenue, yielding an FCF margin of approximately 18.7%. * **Major non-cash items**: Amortisation of intangible assets, depreciation, and stock-based compensation. * **Working capital cash flow impact**: Timing of receivables and payables can swing quarterly cash flows, but working capital is generally a neutral to slight source of cash annually. * **Cash tax rate**: Typically tracks closely to the adjusted effective tax rate of 19% to 20%. ## Sheet Structure 1. **Assumptions**: Hardcoded inputs for organic growth rates by segment, margin expansion targets, tax rates, share repurchases, and WACC. 2. **Revenue Build**: Forecasts for Risk Capital (Commercial Risk, Reinsurance) and Human Capital (Health, Wealth), plus Fiduciary Investment Income driven by interest rate assumptions. 3. **Income Statement**: Consolidated P&L showing Total Revenue, Compensation & Benefits, IT, Premises, D&A, Interest Expense, and Taxes. Must include a reconciliation from GAAP Operating Income to Adjusted Operating Income. 4. **Balance Sheet**: Assets (Cash, Receivables, Fiduciary Assets, Goodwill, Intangibles, ROU Assets) and Liabilities (Payables, Fiduciary Liabilities, Debt, Lease Liabilities, Equity). 5. **Cash Flow Statement**: Net Income, non-cash adjustments (D&A, SBC), changes in working capital, Capex, M&A cash flows, Debt issuance/repayment, and Share Repurchases. 6. **Debt Schedule**: Tranche-by-tranche breakdown of senior notes, calculating interest expense and tracking the deleveraging path to maintain the 2.9x target. 7. **DCF Valuation**: Unlevered free cash flow calculation, terminal value based on perpetual growth, and implied share price. ## Key Financial Relationships 1. `Commercial Risk Revenue = Prior Year Commercial Risk Revenue * (1 + Commercial Risk Organic Growth) + M&A Acquired Revenue` 2. `Reinsurance Revenue = Prior Year Reinsurance Revenue * (1 + Reinsurance Organic Growth)` 3. `Fiduciary Investment Income = Average Fiduciary Assets * Average Short-Term Interest Rate` 4. `Total Revenue = Risk Capital Revenue + Human Capital Revenue` 5. `Compensation & Benefits Expense = Total Revenue * Compensation Ratio (historically 51-53%)` 6. `Adjusted Operating Income = Total Revenue - Compensation & Benefits - IT Expense - Premises Expense - Other General Expenses` 7. `GAAP Operating Income = Adjusted Operating Income - Intangible Amortisation - Restructuring Charges` 8. `Adjusted Net Income = Adjusted Operating Income - Interest Expense - Adjusted Tax Expense` 9. `Free Cash Flow = Cash Provided by Operations - Capital Expenditures` 10. `Ending Share Count = Beginning Share Count - (Share Repurchase Amount / Average Share Price)` 11. `Fiduciary Liabilities = Fiduciary Assets (must always balance exactly)` 12. `Leverage Ratio = Total Debt / Adjusted EBITDA` ## Cross-Sheet Dependencies * The **Revenue Build** sheet feeds the top line of the **Income Statement**. * The **Income Statement** generates Net Income, which feeds the top of the **Cash Flow Statement** and the Retained Earnings line on the **Balance Sheet**. * The **Debt Schedule** calculates Interest Expense, which feeds back into the **Income Statement** (creating a circular reference if interest expense reduces net income, which reduces cash, which increases debt, which increases interest expense). * The **Cash Flow Statement** calculates ending cash and debt balances, which feed the **Balance Sheet**. * The **Assumptions** sheet dictates the margin profile on the **Income Statement** and the growth rates on the **Revenue Build**. ## Sign Convention * Revenues, Assets, Liabilities, and Equity are represented as positive numbers. * On the Income Statement, expenses are represented as negative numbers to allow for simple summation to Net Income. * On the Cash Flow Statement, cash inflows are positive and cash outflows (like Capex, dividends, and share repurchases) are negative. * Margin percentages and growth rates are positive unless representing a contraction or decline. ## Things Most Likely to Go Wrong * Fiduciary Assets and Fiduciary Liabilities must be perfectly matched; failing to link these properly will cause the balance sheet to break. * Aon relies heavily on "Adjusted" metrics. The model must clearly separate GAAP earnings from Adjusted earnings, specifically adding back intangible amortisation and restructuring costs. * The divestiture of the NFP Wealth business in late 2025 removes approximately $127 million in trailing EBITDA. The 2026 forecast must exclude this divested revenue and profit to avoid overstating growth. * Fiduciary Investment Income is highly sensitive to interest rates. Using a flat historical average will misrepresent future revenues if central bank rates are cut. * Stock-based compensation is a material non-cash expense. Excluding it from free cash flow calculations will artificially inflate valuation. * Foreign currency translation can swing reported revenue by 2% to 4% YoY. The model should forecast on a constant-currency (organic) basis. * The share count reduces continuously due to buybacks. Failing to link the share repurchase cash outflow to a reduction in the denominator for EPS will understate per-share value. * The Q1 revenue spike in Reinsurance Solutions means quarterly models must apply strict seasonality weightings rather than dividing annual revenue by four. ## Validation Checks * Adjusted Operating Margin should expand by 50 to 100 basis points annually, remaining in the 32.0% to 34.0% range. * Free Cash Flow must exceed $3.2 billion in 2026 and grow at a double-digit rate. * Debt / Adjusted EBITDA must remain near the management target of 2.9x. * Total Assets must equal Total Liabilities + Equity in every forecasted period. * Fiduciary Assets must exactly equal Fiduciary Liabilities in every period. * Capex as a percentage of revenue should not exceed 1.5%. * The Adjusted Effective Tax Rate should remain stable between 19.0% and 20.5%. * Organic revenue growth should remain in the mid-single digits (4% to 7%). ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Commercial Risk Organic Growth | 5.0 | % | Aligns with historical mid-single-digit pricing and exposure trends. | | Reinsurance Organic Growth | 7.0 | % | Reflects strong demand for alternative capital and catastrophe coverage. | | Health Solutions Organic Growth | 6.0 | % | Driven by healthcare inflation and corporate benefits demand. | | Wealth Solutions Organic Growth | 3.0 | % | Slower growth segment, adjusted for the NFP Wealth divestiture. | | Compensation & Benefits Ratio | 51.5 | % | Reflects ABS efficiencies offsetting wage inflation. | | IT Expense Ratio | 4.5 | % | Steady investment in data and analytics platforms. | | Premises Expense Ratio | 2.5 | % | Continued rationalisation of the global real estate footprint. | | Adjusted Effective Tax Rate | 20.0 | % | Based on Q4 2025 reported adjusted tax rate. | | Capex as % of Revenue | 1.2 | % | Asset-light business model requires minimal physical capital. | | Target Leverage Ratio | 2.9 | x | Management's stated target achieved in Q4 2025. | | Annual Share Repurchases | 1,000 | $ Millions | Matches the 2025 actual capital return execution. | | WACC | 7.5 | % | Reflects investment-grade credit rating and stable beta. | | Terminal Growth Rate | 3.0 | % | Aligns with long-term global GDP and inflation expectations. | | Diluted Share Count (Base) | 216.5 | Millions | Actual Q4 2025 diluted shares outstanding. | ## Data Sources & Benchmarks * **Filings**: SEC EDGAR for Aon plc (10-K, 10-Q, 8-K) and the Aon Investor Relations website for earnings presentations. * **Direct Peers**: Marsh & McLennan Companies (MMC), Willis Towers Watson (WTW), Arthur J. Gallagher & Co. (AJG), Brown & Brown (BRO). * **Industry Data**: Council of Insurance Agents & Brokers (CIAB) for commercial P&C pricing indices; Guy Carpenter or Aon's own Reinsurance Market Outlook for catastrophe bond and treaty pricing trends. * **Consensus Estimates**: FactSet or Bloomberg for forward-looking EPS and revenue consensus to validate model outputs. ## Sources * Aon plc Q4 2025 and Full Year 2025 Earnings Press Release (January 30, 2026). * Aon plc 2025 Annual Report on Form 10-K. * Aon plc Q4 2025 Earnings Call Transcript. * Press releases regarding the acquisition of NFP (closed April 2024) and the divestiture of the NFP Wealth business to Madison Dearborn Partners (announced September 2025). --- ## Frequently asked questions ### What does Aon plc do and what are its main business segments? Aon plc is a leading global professional services firm that provides a broad range of risk, retirement, and health solutions, primarily acting as an advisor and insurance broker. Its main business segments include Risk Capital, which covers commercial risk and reinsurance solutions, and Human Capital, encompassing health and wealth solutions. ### How does Aon generate revenue and what drives its growth? Aon generates revenue through its asset-light, fee-based business model, characterized by recurring revenues and high client retention rates in the mid-90s percentage range. Growth is driven by organic revenue expansion, operating margin improvements from platforms like Aon Business Services, and strategic acquisitions such as the recent NFP deal. ### What is Aon's capital expenditure strategy and how does it impact its financial model? Aon's business model is highly asset-light, resulting in very low capital expenditure, typically 1.0% to 1.5% of revenue. The majority of this capex is growth-oriented, focused on capitalized software development for data analytics and the Aon Business Services platform. ### What are the key assumptions for revenue growth and operating margins in Aon's financial model? The financial model for Aon assumes a revenue growth rate of approximately 4.98%. Operating margin expansion is a key assumption, driven by the efficiencies and synergies from the Aon Business Services platform and the integration of acquisitions. ### What are the primary balance sheet considerations for Aon's valuation and capital allocation forecast? Aon's balance sheet is dominated by Goodwill and Intangible Assets from acquisitions, along with Fiduciary Assets and Liabilities which represent client funds and are not corporate cash. The model also considers the company's deleveraging trajectory following significant acquisitions like NFP for valuation purposes. ### What is the forecast horizon for the downloadable Aon financial model and what is its purpose? The downloadable Excel model for Aon provides a forecast horizon from FY2026 through FY2030. Its purpose is to offer a comprehensive equity valuation and capital allocation forecast, enabling analysts to assess the impact of various financial drivers. [Interactive forecast calculator](https://finamodel.com/companies/aon/forecast)