Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. It's good to have
Speaker 1: back with us, Edmund Reese, executive vice president and CFO
Speaker 1: of the nearly seventy eight billion dollar marketcap professional services,
Speaker 1: advisory and insurance brokerage company. Stock up a little over
Speaker 1: two and a half percent year to date, down about
Speaker 1: five percent since reporting those earnings yesterday, and good to
Speaker 1: be back on the program. The company and the team
Speaker 1: always a good read on how the business world is
Speaker 1: feeling about the current environment when it comes to things
Speaker 1: like risks, climate, governance issues, M and A and more.
Speaker 1: Where do you think the biggest opportunity for growth is
Speaker 1: for a.
Speaker 2: On Well, First, well, Tim Carroll, thanks for having me
Speaker 2: back here. The biggest opportunity for growth is actually what
Speaker 2: we just saw over the past two years in our
Speaker 2: three year strategy and what we just saw in this
Speaker 2: most recent quarter with strong results. Complexity across the risk
Speaker 2: that our clients are facing is the biggest biggest issue
Speaker 2: we're discussing with them. That's the political violence and war
Speaker 2: exposures in the Middle East. That's the hyperscaler's access to
Speaker 2: additional capacity for the AI infrastructure builds, that's working with
Speaker 2: our clients on large scale defense projects. All of these
Speaker 2: things are coming together and intermingled on the minds of
Speaker 2: our clients, and we are providing solutions to help them
Speaker 2: with that as we give them access to our data,
Speaker 2: help them understand their risk and then match it with capitals.
Speaker 2: And that's where we actually saw when you look at
Speaker 2: those lines in our P and L and on our
Speaker 2: income statement, that's where you saw the growth.
Speaker 1: I don't want to be crass here, but in other words,
Speaker 1: is geopolitical uncertainty?
Speaker 2: Is war?
Speaker 1: Is instability good for your business?
Speaker 2: Well, it creates complexity for our clients and helping our
Speaker 2: and that drives demand for us, and that is good
Speaker 2: for our clients and good for our shareholders as well.
Speaker 2: If you think about that geopolitical violence, you have not
Speaker 2: just the assets themselves, the ships, the cargo, but you
Speaker 2: also have supply chain risk. You have the political violence
Speaker 2: and terrorism. Those things create demand because clients want to
Speaker 2: protect their assets and they still want to be able
Speaker 2: to invest and grow and know how to do that.
Speaker 2: We give insight and of course that drives drives more
Speaker 2: demand for our products and helps us with the growth.
Speaker 3: All right, I want to cut to the chase with you,
Speaker 3: how freaked out is the corporate community because there's a
Speaker 3: lot and you know coming at them. You know, this
Speaker 3: war that just you know, peace talks, not peace talks,
Speaker 3: more attacks. There's that, there's the higher costs of maybe
Speaker 3: doing things in your back yard in terms of production,
Speaker 3: energy cost, there's just a lot. So how freaked out
Speaker 3: is kind of the corporate community? In your view?
Speaker 2: Risk has been rising, Risk has been rising, and the
Speaker 2: intermingledness of that risk, all of them connected, is creating
Speaker 2: more angst, more volatility in the p and ls and
Speaker 2: in the balance sheets of our clients. And when these
Speaker 2: things come together, there is anks. But they still want
Speaker 2: to invest, they still want to grow, and so we
Speaker 2: have been investing. We've been investing in capabilities to do
Speaker 2: what I was saying, helping them understand their exposure, helping
Speaker 2: them connect that data to their assets and understand how
Speaker 2: it impacts their balance sheets. And then of course bringing
Speaker 2: in not just the traditional capital in our industry from
Speaker 2: insurance carriers, but from other players as well, so that
Speaker 2: our clients can still continue to grow, and of course
Speaker 2: that help helps our growth as well.
Speaker 1: Is there enough, you know, if we're talking about the
Speaker 1: data center, part of this conversation and the opportunity there
Speaker 1: is there actually enough insurance capacity for all the demand
Speaker 1: that we're seeing with AI data centers.
Speaker 2: Tim If you think about it, these data center sites,
Speaker 2: some of the clients that you'll be talking to later
Speaker 2: today and actually talked about at the beginning of your program,
Speaker 2: they're coming on a twenty billion, forty billion, fifty billion
Speaker 2: per site. The insurance industry traditionally is about a five
Speaker 2: trillion dollar industry across all property, across all casualty, across
Speaker 2: health and wealth as well, and so when you bring
Speaker 2: on data centers that are of this size, it's not
Speaker 2: sufficient capital from traditional insurance. So we've been talking for
Speaker 2: quite some time. For the industry to stay relevant, we
Speaker 2: are going to need to have access to what we've
Speaker 2: sized as a two hundred and fifty trillion opportunity. We
Speaker 2: just need a small slice of that expand the addressable
Speaker 2: market that's going to come from institutional investors, that's going
Speaker 2: to come from private equity, sovereign wealth funds, and the
Speaker 2: only way that they will enter is if we can
Speaker 2: provide the data. Just like we began this cat catastrophe
Speaker 2: bond market, which is growing at a team rate and
Speaker 2: we're over half of it. We're seeing it with our
Speaker 2: treaty products aggregating risk from insurance, and we're going to
Speaker 2: have to do the same thing for data centers here,
Speaker 2: or you're going to see companies have it on their
Speaker 2: own balance sheets or go out and look the fun
Speaker 2: debt for it. But we think we certainly have interests
Speaker 2: as asset managers want assets with uncorrelated return. We are
Speaker 2: giving them the data to help them see that they
Speaker 2: can get attractive yields off of that, and we do
Speaker 2: think that we'll continue to be relevant. Is this extensive
Speaker 2: build increasing investment in data centers continues over the next
Speaker 2: few years.
Speaker 3: So, as you guys know IA, you have all described
Speaker 3: in the past the data centers as a ten billion
Speaker 3: dollar premium opportunity. Is this still a reasonable amount? Has
Speaker 3: the company's view changed on it? Is it less? Is
Speaker 3: it small? Numbers matter?
Speaker 2: When we gave that estimate, the spend in twenty twenty
Speaker 2: six was less than the eight hundred billion that is
Speaker 2: estimated to be today. The infrastructure spend over the next
Speaker 2: three years will be at least two trillion, And when
Speaker 2: you think about the ongoing operations of that some estimates
Speaker 2: have it the tighest five to seven trillion, so it's
Speaker 2: only increased since then. The question is are we going
Speaker 2: to be able back to Tim's question of getting the
Speaker 2: sufficient capital in to be able to ensure and manage
Speaker 2: the risk associated with it. So we're very bullish that
Speaker 2: that's going to be an opportunity, a tailwind for our
Speaker 2: growth as we move forward. And we have been making
Speaker 2: the investments on the capabilities using our data because we are,
Speaker 2: you know, one of the largest players in the industry
Speaker 2: to give the insights to these asset managers.
Speaker 3: All Right, maybe a silly question, but I'm thinking somebody
Speaker 3: at home might be listening or watching and wondering when
Speaker 3: we talk about enough insurance capacity for AI data centered demand,
Speaker 3: what exactly are we talking about? What is that insurance capacity?
Speaker 2: Well, if you have a I mean think about your home,
Speaker 2: you know, a million, just.
Speaker 3: Protecting the data center, is that what it is?
Speaker 2: Well, it's protecting the data center, the build of it,
Speaker 2: is protecting the operations of it, if weather comes in,
Speaker 2: cyber has an impact on it, the general liability. So
Speaker 2: it's we actually have something that we call the data
Speaker 2: center life cycle program, not just to build the physical
Speaker 2: facilities itself, but the ongoing operations and all the risk
Speaker 2: that it would face. You measure risk here with data centers.
Speaker 2: Our CEO likes to say, you measure it in millions
Speaker 2: per minute in terms of operations. So imagine the risk
Speaker 2: associated with that, and you can ensure that and will
Speaker 2: help match that risk with the right capital.
Speaker 1: You know, we're actually seeing a headline that's related to
Speaker 1: this crossing the Bloomberg Terminal right now. Deep Seek is
Speaker 1: developing a massive artificial intelligence data center and Inner Mongolia.
Speaker 1: According to people familiar with the matter, tad one gigawatt
Speaker 1: worth of compute, the company aims to build its own
Speaker 1: facility while leasing additional capacity from other companies. It's pushing
Speaker 1: to bring at least part of its data center's capacity
Speaker 1: online by the end of next year or early twenty
Speaker 1: twenty eight. Edmund, we're speaking with Edmund recfo of aon
Speaker 1: We're talking data centers. We're talking insurance and the insurance
Speaker 1: market for data centers. What do you think when you
Speaker 1: see a headline like this, Deep Zinc developed Deep Seek
Speaker 1: developing this massive AI data center in Inner Mongolia.
Speaker 2: As you were reading it, there were three things that
Speaker 2: were going across my mind. One is the construction, Two
Speaker 2: is the energy associated with it, another area that is
Speaker 2: high growth for us that you'll need to support this
Speaker 2: data center. And the third thing is the engineering and
Speaker 2: expertise that we have and understanding not building that in
Speaker 2: a concentrated location, but dispersing the risk and giving insight
Speaker 2: on that. So that is a company that could definitely
Speaker 2: benefit from the insights that we provide from the data.
Speaker 2: Here is they pursue what is going to be a
Speaker 2: massive investment and ensure that they get the returns that
Speaker 2: they want on it.
Speaker 3: Well, let me just go there. Then are you working
Speaker 3: with deep Seek? Are you working with Amazon, Meta? Microsoft?
Speaker 3: You smile for those who are listening, are you.
Speaker 2: All smile and say that we are You know, we
Speaker 2: given what we have, we have strong relationshipships across the hyperscalers.
Speaker 2: I of course can't talk about any specific company here,
Speaker 2: but increasingly the expertise and the engineering advice. I think
Speaker 2: I mentioned on this program before that even before the
Speaker 2: large data center boom here, we had advised on number
Speaker 2: thirty percent of the data center builds in the US,
Speaker 2: which is much larger than any other country. You have
Speaker 2: to go to China and Germany before you start to
Speaker 2: see the next one. We have high market share there
Speaker 2: as well. So imagine all the engineering expertise that we
Speaker 2: have understanding where to put the sites, how to build them,
Speaker 2: how to ensure them themselves. And so with that expertise,
Speaker 2: I think it drives more demand for us, and we
Speaker 2: are in fact working with many of the large hyperscalers
Speaker 2: that you talk about on the show.
Speaker 3: Just real quickly. Any signs that this stuff is slowing down,
Speaker 3: because this is the big question or one of the
Speaker 3: big questions. Any signs that you're like, oh this, you know,
Speaker 3: insurance capacity for a data centered dement it's going to
Speaker 3: slow down. Any signs of that, Carol.
Speaker 2: The last five quarters, I got on our earnings call
Speaker 2: and said that we had double digit growth and construction,
Speaker 2: which is where this shows up, including this quarter here.
Speaker 2: Now that is you know, it's not where we drive
Speaker 2: growth broad based through many different product lines, so we're
Speaker 2: not overweighted to this, but it has been a strong
Speaker 2: contributor for us, and we see it to be a
Speaker 2: tailwind as we move forward.
Speaker 3: Here. We just want more time. I'll come back come
Speaker 3: back soon. Thank you so much. Always, always appreciated for
Speaker 3: having me again. Yeah, be well Edmund Reee, Executive Vice
Speaker 3: president cfo of A on joining us right here in
Speaker 3: New York City.