AON’s CEO Sees Huge Potential in These Four (or Five) Megatrends

Greg Case, CEO of AON, the large risk manager and insurance broker, says his company has identified what it calls four megatrends which are now shaping the world of business: trade, technology, weather, and workforce.

“These four mega trends create client demand,” Case told me. “Our world is helping clients understand how to deal with that set of challenges.” Curiously, when I asked Case which one of these four trends—and the risk that comes with them—is most worrisome, he told me it was the fifth one.

Huh?

Meaning “all of the above,” Case said. Even more than that, it’s actually the combination of two or more of these factors that Case says is increasingly significant.

Case, who’s been CEO of AON since 2005, leads a company with origins in Chicago that go back more than 100 years. AON—which means “oneness” in Irish—is the product of the merger of two insurance companies which joined forces in 1982, Ryan Insurance Group and Combined Insurance Company of America. Both predecessor companies were founded by giants of the insurance business, respectively: billionaire Pat Ryan, a longstanding benefactor of Northwestern University, who also owns a large stake in the Chicago Bears; and the colorful W. Clement Stone, a disciple of Norman Vincent Peale’s “The Power of Positive Thinking” and a one-time pal of Richard Nixon.

I had a chance to speak with Case recently about those megatrends and also how GLP-1 drugs are revolutionizing healthcare, as part of our At Barron’s interview series. Here are some highlights of the interview, which have been edited and condensed for clarity.

Barron’s: Tell us about those four risky megatrends Greg.

Greg Case: We said 10 years ago we were worried about volatility on behalf of our clients, and what’s happened is these four megatrends have just become more and more intense.

Why is the world more volatile to your mind?

Take technology. Communication technology helps the world become more connected. It creates opportunity, which is terrific, but it also creates volatility. [Artificial intelligence] is creating volatility too. In trade, supply-chain challenges have become more intensified because of geopolitical challenges. We have clients who spent years curating the most incredible supply chains now only to find out that some of the areas in the supply-chain world are becoming more and more difficult to execute because governments are not as aligned as they were before. Fundamental challenges around climate have just become more and more significant.

Then as you come out of the pandemic, what’s going on with talent? How do you find talent? How do you retain talent? How do you nurture and reinforce talent? All these things, Andy, for a whole series of reasons, each have become problematic. The last thing I would say on this, is that individually each of these is bigger, but collectively, they’re connected.

Tell us specifically how those megatrends are interconnected.

People talk about this all the time, but clients are living them. Literally seeing the impact on the performance of their business and on their people. You can’t talk about weather and climate challenges without understanding the implications on talent.

Recently I’m with the CEO of one of the biggest contractors in the world and he’s talking about climate risk. And what he’s worried about, is he’s going to bid on a multi-year contract. It’s massive. He was worried about the fact that if it’s above 120 degrees, can he put employees on the field. How does he change the bid process because of that? That’s fundamental climate risk and talent embedded in it. These things all link.

Your company also has been doing work on GLP-1 drugs. What does a medication that addresses weight loss and type 2 diabetes have to do with Aon?

Thanks for asking about that. This goes back to talent and talent retention. Companies give salaries and benefits including healthcare. Healthcare now accounts for 20% to 21% of [gross domestic product]. That’s amazing. By the way, it’s going to be 23% to 24% by 2030. Healthcare is going up nine percent to 10% every year, per unit cost. How’s health care doing? It’s deteriorating. So how’s this working? Are we really getting the economic benefit for it?

If you’re head of HR at a company, you’re in a really difficult spot. You’d like to [include GLP-1 drugs in healthcare plans] because it might be helpful, but the cost is massively prohibitive. The question is, is it worth it?

We pulled together a 50 million person database and took out from that database the 130,000, 140,000 people who have actually taken GLP-1 drugs for 24 months, and asked the question, did the cost of health go up or go down if you’re taking the drug? Never been done before.

And the answer was?

A greater than a 10% reduction in trend. It’s crazy, amazing. You incorporate the cost of the drug, and over time, you reach a one-point change in trend in healthcare costs. It’s massive.

And it’s not just about the trend cost. It’s also about the deferred onset of things like diabetes, osteoporosis, et cetera. The cost you spend is less about remediation and more about prevention. Over time, at a 10-plus percent trend decrease, no matter the cost of the drug, even in the current cost [and the cost of the drugs are going to come down], you cross [and save money]. I’m not trying to overstate this, but we think this is a generational opportunity to improve population health in a way we’ve never seen before. So now our goal is to how do we help our clients introduce this into their work groups, in a positive way?

Shifting gears, Aon has an $85 billion market cap, a P/E of 30 and revenue of about $13 and a half billion. Why should investors buy this stock right now?

If I were an investor, I would step back and ask about fundamental demand and capability. Demand for what we do is massive and going up, and volatility is going up. We’re pretty excited about what we think the next five to 10 years is going to be.

Thanks so much for joining us, Greg.

Write to Andy Serwer at andy.serwer@barrons.com