Aon (AON) Q4 2025 earnings review
Strong Profit Engine Masks Human Capital Softness
Aon closed 2025 with impressive bottom-line execution. Adjusted EPS grew 10% to $4.85, and adjusted operating margin expanded a massive 220 basis points to 35.5%, driven by restructuring savings and the NFP integration. However, top-line cracks appeared: Organic revenue growth slowed to 5% (from 7% in Q3), dragged down by a sharp deceleration in Human Capital (Health & Wealth), which slowed to 2% growth. While the '3x3 Plan' is delivering efficiency, the sudden softness in discretionary talent spending raises questions for 2026.
🐂 Bull Case
Adjusted operating margins expanded 220 bps YoY to 35.5%. This was driven by $50M in net restructuring savings in the quarter and efficiency gains from the Aon Business Services (ABS) platform. 2026 guidance calls for another 70-80 bps expansion.
Reinsurance Solutions remains a powerhouse, growing 8% organic in Q4 driven by double-digit growth in insurance-linked securities (ILS) and the Strategy and Technology Group. This high-margin segment continues to outperform.
🐻 Bear Case
Both Health and Wealth segments decelerated significantly to +2% organic growth in Q4 (down from +6% and +5% respectively in Q3). Management cited 'slower discretionary spend in Talent Solutions' and 'delayed closed sales'—a potential early warning sign for the macro environment.
Total organic growth of 5% in Q4 is a deceleration from 7% in Q3 and sits at the low end of the 'mid-single-digit' target. With Human Capital stalling, the burden falls heavily on Risk Capital to carry the growth narrative.
⚖️ Verdict: 🟢
Bullish. The 220 bps margin expansion and 16% Free Cash Flow growth demonstrate operational excellence. While the Human Capital slowdown is a valid concern, the company's ability to compound earnings (+10% EPS) and cash flow despite top-line friction justifies a positive stance.
Key Themes
Aon Business Services (ABS) Driving Margins
The operational efficiency story is Accelerating. Aon delivered 220 basis points of margin expansion in Q4, reaching 35.5%. This was fueled by $50M in restructuring savings realized in the quarter. The company continues to successfully leverage its shared services platform to absorb inflation and integration costs while dropping more revenue to the bottom line.
Human Capital Discretionary Spending Slowdown
Decelerating. A clear divergence has emerged between Risk Capital (strong) and Human Capital (weak). Health Solutions slowed to 2% organic growth (from 6% in Q3) and Wealth Solutions slowed to 2% (from 5% in Q3). Management explicitly flagged 'slower discretionary spend in Talent Solutions' and 'delayed closed sales.' This suggests clients are becoming cautious with consulting/project-based spend.
Reinsurance & ILS Momentum
Stable/Strong. Reinsurance Solutions grew 8% organic, driven by double-digit growth in insurance-linked securities (ILS) and the Strategy and Technology Group. Despite broader market chatter about pricing moderation, Aon's position in facultative placements and capital markets advisory is allowing it to sustain high-single-digit growth.
Deleveraging Accomplished
Management met its leverage objective in Q4, paying down $1.9 billion in debt during 2025. This unlocks the balance sheet for 2026. With the leverage target met, the narrative shifts back to 'balancing investment in high-return M&A and capital return.' Expect buybacks to potentially accelerate or remain steady ($250M repurchased in Q4).
Wealth Solutions Headwinds
Wealth Solutions revenue declined 10% on a reported basis (though +2% organic). This disconnect is largely due to the sale of NFP Wealth. However, the organic deceleration to 2% is concerning. In prior quarters, Aon noted pressure from lower fiduciary investment income due to interest rates; combined with 'delayed closed sales' in Q4, this segment is facing multiple friction points.
Other KPIs
Accelerating. Up 14% YoY. The company converted its earnings strength into cash efficiently, despite working capital headwinds mentioned in the full-year summary. This supports the 2026 outlook for double-digit FCF growth.
Stable. Consistent with the 6-7% range seen throughout 2025. Strong growth in North America and EMEA driven by net new business. Double-digit growth in construction indicates infrastructure projects remain a key tailwind.
Increasing. Up from 16.7% in 24Q4. The increase was driven by changes in the geographical distribution of income and fewer favorable discrete items. This created a slight headwind to EPS growth compared to the prior year.
Guidance
Stable. Matches the long-term algorithm and 2025 actuals (+6%). Implies that management expects the Q4 Human Capital slowdown (2%) to stabilize or that Risk Capital will continue to over-perform.
Stable/Accelerating. Following the massive expansion in 2025 (FY +90bps, Q4 +220bps), promising another ~75bps suggests distinct confidence in the ABS efficiency program and NFP synergies. Implies FY26 margins of ~33.2%.
Stable. Continued expectation of strong cash conversion, consistent with 2025 performance (+14%).
Reversing. After facing FX headwinds in 2025, current rates suggest a tailwind for 2026 EPS, primarily in Q1 ($0.36 favorable impact expected).
Key Questions
Human Capital Deceleration
Organic growth in both Health and Wealth decelerated sharply to 2% in Q4 from 6% and 5% in Q3. You mentioned 'slower discretionary spend in Talent'—is this a structural shift in client behavior entering 2026, or a one-quarter timing issue?
Wealth Solutions Divergence
Wealth Solutions reported revenue dropped 10% while organic was +2%. Beyond the NFP Wealth sale, are there other divestitures or headwinds impacting the reported top line, and when does the reported growth converge with organic?
Margin Sustainability
Q4 margins expanded 220 basis points, well above the annual pace. Was there any one-time benefit in the quarter (beyond the cited restructuring savings), and does the Q4 exit rate signal upside to the 70-80 bps expansion guide for 2026?
Talent Solutions Outlook
With Talent Solutions cited as a drag, how does this impact your hiring strategy? Are you slowing headcount growth in advisory areas, or is this viewed as a temporary cyclical soft patch?
Capital Allocation Shift
Now that the leverage objective has been met, will we see an acceleration in share repurchases in Q1 2026, or is the priority shifting back to M&A given the NFP integration progress?