Aon plc (AON) stock intrinsic value fair value estimate & owner earnings analysis

Aon is one of the world's largest insurance and reinsurance brokers and a human-capital adviser. It earns commissions and fees for placing and advising on risk rather than for bearing it, so it needs little capital, revenue recurs year after year, and no single client is material. Segments: Commercial Risk Solutions ($8.5B of 2025 revenue, organic growth 6%), Reinsurance Solutions ($2.8B, 6%), Health Solutions ($3.8B, 5%) and Wealth Solutions ($2.1B, 5%). In October 2025 Aon sold most of the NFP wealth-management businesses (Wealthspire, Fiducient, Newport Private Wealth) for $2.3B in cash and used the proceeds to cut borrowings. How we measure earning power. We use the cash the business generates after the cost of employee share awards (which we treat as a real expense), after normal capital spending, and with swings in receivables, payables and tax timing removed, then add back interest paid so the business can be valued before its lenders and the debt subtracted afterwards. On that basis cash earnings per share before interest were about $13.50 in 2022, $15.20 in 2023, $13.80 in 2024 (NFP owned for eight months) and $17.90 in 2025. We take a level of about $14.10 per share, close to the 2022-2025 median of $14.50 and trimmed because the sold wealth business contributed to the recent years. Earlier years are left out because they describe a different company: 2017 and 2018 carried a one-off tax bill on the benefits-outsourcing sale and heavy restructuring and pension cash, and 2021 absorbed the $1B termination fee paid when the Willis Towers Watson merger was abandoned. The 2025 gain of $1.2B on the wealth sale is excluded. Amortisation of acquired client relationships ($778M in 2025) is a non-cash charge and is added back; because those acquired books wear out, we credit growth below Aon's recent organic rate rather than adjusting the earnings level. The first half of 2026 supports the level: operating cash flow was $986M versus $936M a year earlier, interest paid fell to $363M from $416M, and share-based pay fell to $204M from $266M, all with the wealth business already gone. Growth credited. Cash earnings per share before interest rose about 29% in 2025, but that included timing benefits, so we do not extrapolate it. Year one of the middle case grows 4%, below that trailing figure, so no reversal is being assumed. What is credited is the continuation of organic growth that Aon has reported for years (6% in each of its four main lines in 2025, driven by net new business and strong retention, and positive even in 2020), taken at 4% for five years and 3% for the next five. Left out: margin gains from the Aon United program, further acquisitions, and any hard-market pricing tailwind, because none is secured or a repeatable step in the way organic client growth is. What the cases assume. Middle case: that 4% then 3% growth path, then earnings held flat in nominal terms indefinitely, since Aon's client relationships and retention have persisted for decades. The business is worth about $311 per share, it owes about $67, leaving about $243. Downside case: a soft insurance-pricing market combined with a recession of the 2008-2010 and 2020 type, where revenue stalls for about three years while compensation, roughly 60% of revenue, keeps rising 3-4% a year. That takes cash earnings down about 20% from the base level by year three (to about $11.20), followed by only 2% growth, and the earnings stream ends after thirty years rather than lasting indefinitely, reflecting wear on the acquired NFP client books and adviser departures. Refinancing about $5.4B of 2027-2030 maturities at higher spreads adds roughly $0.5B to what is owed. The business is worth about $167 per share, it owes about $70, leaving about $97. Even in this case the roughly $2.4B of annual cash flow comfortably covers an interest bill near $0.75B. Upside case: organic growth of 6%, the rate Aon has actually reported, for five years then 5%, with earnings flat thereafter. The business is worth about $363 per share, it owes about $67, leaving about $296. Debt. Borrowings were $15.0B at June 30, 2026 ($13.0B long-term and $2.0B current), against $1.3B of cash and short-term investments, of which we treat about half as surplus. Scheduled repayments at year-end 2025 were $589M in 2026, $1.72B in 2027, $352M in 2028, $1.75B in 2029 and $1.0B in 2030, with all covenants met. Net debt of roughly $14.4B is about $67 per share. Interest paid runs near 5% of debt, close enough that we made no adjustment for debt cost. Borrowings fell from $17.0B at the end of 2024 to $15.2B at the end of 2025 and $15.0B in mid-2026. What is different from the last analysis. Aon sold its wealth business and repaid debt, and cash generation per share held up on a smaller company. The earlier per-share values were built on a different basis and are not comparable. What would make this wrong. A longer or deeper soft market than the 2008-2010 episode, loss of a large block of NFP advisers, or a large professional-liability or regulatory settlement. We tested the earning level against the first half of 2026 and the debt schedule against the downside case's cash flow, and both held. Margin-of-safety judgement. We are fairly sure of the earnings level: four straight years between $13.50 and $17.90 per share before interest, on recurring fee and commission revenue. The worst plausible event is a prolonged soft market and recession with flat revenue and rising pay costs, plus an unmodelled liability claim; the business would survive it because interest is covered more than three times even in the downside case and maturities are spread over five years. If we are wrong about the two things most likely to be wrong, growth and margins, the shares are worth about $97 if growth stalls and compensation pressure bites. The price assumes a holding period of about five years; during that period Aon pays a dividend of about $3 per share a year and has been reducing the share count (diluted shares of 213.9M in the second quarter of 2026 against 217.1M for 2025). From $100, the middle case implies roughly $3 a year of dividends growing steadily and shares worth well over $240 by year five, a return above 20% a year; the downside case implies roughly the original price back. A higher price would leave too little cushion in the downside case for a 20% target, so the margin-of-safety price is $100.