WEBVTT - Aon CFO Edmund Reese on 4Q Earnings, Global Risk Outlook

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>You're listening to Bloomberg Business Week with Carol Masser and

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<v Speaker 2>Tim Stenoveek on Bloomberg Radio.

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<v Speaker 1>A on reported earnings this morning, EPs and adjusted operating

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<v Speaker 1>margin beats, top line revenues a little bit below expectations.

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<v Speaker 1>Stock has been up about two percent intra day at

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<v Speaker 1>its high today. Stock slightly lower year to date, and

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<v Speaker 1>it's slightly lower in twenty twenty five. We've got a

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<v Speaker 1>great guest to talk about the company's business, the outlook.

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<v Speaker 1>We welcome back Edmund Reese. He's executive ep CFO of

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<v Speaker 1>the nearly seventy five billion dollar market cap insurance brokers company.

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<v Speaker 1>We're talking, of course about a He joins us once

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<v Speaker 1>again in studio. Nice to have you back.

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<v Speaker 3>How longright for having me, Carol too.

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<v Speaker 1>Nice to have you so tell us before we get

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<v Speaker 1>into the quarter and talk about the business specifically, we

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<v Speaker 1>keep asking leaders what it's like to be a member

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<v Speaker 1>of the C suite in this environment?

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<v Speaker 3>Well, I mean, this is a very for us and

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<v Speaker 3>for our clients. It's a very volatile and uncertain environment.

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<v Speaker 3>There's a ton of news today that may bring some

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<v Speaker 3>stability to it, but for us, it's requiring more of

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<v Speaker 3>our services and demand from our clients. There's a lot

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<v Speaker 3>going on, and we have solutions that can help our

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<v Speaker 3>clients protect their businesses and grow their businesses. So there's

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<v Speaker 3>a lot going on. It's an exciting time to be

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<v Speaker 3>in my seat sitting with aon.

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<v Speaker 2>Do you ever lie there at night before you go

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<v Speaker 2>to sleep and say to yourself, I really hope I

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<v Speaker 2>don't wake up to a social media post from the

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<v Speaker 2>president about the insurance industry.

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<v Speaker 3>Well, look, I think we all have the same objectives here,

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<v Speaker 3>and that's really to help this economy be able to move,

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<v Speaker 3>and we provide solutions to help the clients with that.

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<v Speaker 3>So volatility actually for us in many cases is of

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<v Speaker 3>positive things because we think we have data and insights

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<v Speaker 3>and solutions that can help companies move like that. So

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<v Speaker 3>when there's a post like that, it actually means more

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<v Speaker 3>demand for our service costs.

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<v Speaker 1>That's what I want to ask you. Though you mentioned

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<v Speaker 1>volatility that your clients are dealing with, What are the

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<v Speaker 1>biggest aspects of volatility that they keep mentioning to you?

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<v Speaker 1>What are the risks that they are most worried about

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<v Speaker 1>in today's environment.

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<v Speaker 3>When I last came onto this show. I use this

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<v Speaker 3>term the megatrens, and i'd categorize what our clients are

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<v Speaker 3>talking about right now in those same categories. You're going

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<v Speaker 3>to be familiar with them. When we think about technology,

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<v Speaker 3>they're talking about data center builds and digital infrastructure, and

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<v Speaker 3>there that is a demand supply issue to that what

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<v Speaker 3>you're talking that's one of the top items right now

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<v Speaker 3>in terms of growth. We had great results that we

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<v Speaker 3>can get into that was one of the drivers of growth.

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<v Speaker 3>They're talking about trade. I just saw a headline on

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<v Speaker 3>your newscast here that talked about the four hundred million

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<v Speaker 3>dollar tariff based revenue hit. They want to know how

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<v Speaker 3>to manage their supply chains and diversify those things. They're

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<v Speaker 3>talking about the AI impact on workforce as a result.

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<v Speaker 3>They're talking about the storm here in New York weather,

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<v Speaker 3>the four megatrens. So those trends I think are still

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<v Speaker 3>top of mind. They might change each time that I

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<v Speaker 3>come onto this show, but there's still top of mind

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<v Speaker 3>for our clients, and that's where we're helping them.

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<v Speaker 2>What happens to your business though, if the AI trend unwinds,

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<v Speaker 2>if the AI trade unwinds, if we don't see the

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<v Speaker 2>productivity and we don't necessarily see the value that is

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<v Speaker 2>promised with AI.

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<v Speaker 3>I think we have a long runway before we start

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<v Speaker 3>to see right now the fact that companies are investing

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<v Speaker 3>in AI. They're really starting to reevaluate, as an example,

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<v Speaker 3>their workforces. What is the job architecture going to be,

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<v Speaker 3>what's the pay structure going to be, what's the benefits

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<v Speaker 3>going to be? We have data and analytics. We have

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<v Speaker 3>a database Radford mcglogglin that many of your viewers here

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<v Speaker 3>would be familiar with with over thirty million employees in it.

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<v Speaker 3>So we know that companies are investing because we see

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<v Speaker 3>jobs with this description and it up two thousand percent

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<v Speaker 3>over the past couple of years. And we can help

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<v Speaker 3>companies think about this workforce transition. We can help them

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<v Speaker 3>think about how the upskill and reskal their employees so

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<v Speaker 3>they can work alongside with AI. So it might change,

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<v Speaker 3>but we think we know that the investment is large,

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<v Speaker 3>We know that this is a long journey ahead before

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<v Speaker 3>we start to see a shift. There's a lot of

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<v Speaker 3>work and insight that we can give clients right now

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<v Speaker 3>on it.

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<v Speaker 1>Let's talk about earnings and unfortunately, as you know, we

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<v Speaker 1>in the business media and journalism like to know about

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<v Speaker 1>the outlook. You did give an outlook, and I am

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<v Speaker 1>curious how much in terms of data centers, because you

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<v Speaker 1>do talk about that a lot with us. How much

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<v Speaker 1>of that is a tailwind in your guidance for twenty

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<v Speaker 1>twenty six. I mean, should AI investment on one rapidly?

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<v Speaker 1>Would that be meaningful to your top line broads for

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<v Speaker 1>twenty twenty six.

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<v Speaker 3>We have a broad based business. We're operating in one

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<v Speaker 3>hundred and twenty countries right now. We have broad solutions

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<v Speaker 3>across commercial risk, across reinsurance, health and wealth. The data center,

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<v Speaker 3>the AI, the technology is a component of it. The

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<v Speaker 3>guidance that we gave was for mid single digit or

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<v Speaker 3>greater growth. Mid single digit or greater growth. And by

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<v Speaker 3>the way, we're going into the third year of our

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<v Speaker 3>three year plan. We set three year plans here and

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<v Speaker 3>that will be a component of it.

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<v Speaker 2>But look, we're not overly exposed.

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<v Speaker 3>I'm not really exposed to that at.

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<v Speaker 1>The quarter of the business.

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<v Speaker 3>In fact, we think it's probably a tailwind that further

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<v Speaker 3>supports the mid single digit growth that is not baked

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<v Speaker 3>in that extreme amounts at the moment as we think

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<v Speaker 3>about the guy.

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<v Speaker 1>Interesting.

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<v Speaker 2>You know, I ran into a colleague I haven't seen

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<v Speaker 2>in a bit of time today and we were talking

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<v Speaker 2>and I was just like, we both agreed. I can't

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<v Speaker 2>believe January has been like this already. You know, things

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<v Speaker 2>were kind of slow in the first few days of

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<v Speaker 2>the new year, and then you had whatever, everything happening

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<v Speaker 2>in Venezuela. We have everything happening at Davos. We have this,

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<v Speaker 2>you know quote Armada on its way to Iran, the Greenland,

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<v Speaker 2>everything there. Given what has happened in recent weeks, are

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<v Speaker 2>you seeing clients looking to expand protection for things like trade, credit, contingent,

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<v Speaker 2>business interruption, war terrorism, those things.

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<v Speaker 3>I'd add to it, politically, insurance, cyber. So yes, risk

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<v Speaker 3>is increasing, and in fact, one of the things that

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<v Speaker 3>you showed the slide of our company, but the industry

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<v Speaker 3>in particular, one of the things is that maybe pricing

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<v Speaker 3>has been coming down in recent times. In clients are

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<v Speaker 3>seeing that as an opportunity to increase their limits across

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<v Speaker 3>the categories that you just talked about. They're seeing it

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<v Speaker 3>as an opportunity to increase coverage. Do I have enough cyber?

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<v Speaker 3>They're seeing it as an opportunity to expand across their

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<v Speaker 3>overall portfolio and have better protection to grow their business,

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<v Speaker 3>and that it has been the driver of the growth

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<v Speaker 3>that we've seen over the first two years of our

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<v Speaker 3>plan and why we're so confident in our outlook going

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<v Speaker 3>in the twenty twenty six as well.

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<v Speaker 1>One of the things I wanted to ask you, we've

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<v Speaker 1>only got about a minute or so left here. You

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<v Speaker 1>guys put out a review and you talked about the

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<v Speaker 1>LA fires, and it was overall global economic losses stemming

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<v Speaker 1>from disasters including thunderstorms and earthquakes total about two hundred

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<v Speaker 1>and sixty billion, and I think there was global insured

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<v Speaker 1>losses more than one hundred and twenty seven billion from

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<v Speaker 1>natural disasters, dominated by more than one hundred billion occurring

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<v Speaker 1>in the US after the LA fires. How do you

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<v Speaker 1>continue to address global climate change? I mean, we've done

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<v Speaker 1>a story here at Bloomberg about so many people who

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<v Speaker 1>haven't been able to rebuild because there's fights between the

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<v Speaker 1>insurers and I think utilities or the city, like who

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<v Speaker 1>is responsible for that? That those costs mean while people

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<v Speaker 1>don't have homes. Forgive me, I'm only saving about forty

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<v Speaker 1>five seconds. How do you guys address this.

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<v Speaker 3>That is one of the four mega trends that I

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<v Speaker 3>just talked about.

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<v Speaker 2>Well weather ether to.

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<v Speaker 3>The point that you just made, it has been that

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<v Speaker 3>record highs twenty five was kind of flat, but you

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<v Speaker 3>just said one hundred and twenty seven billion, So it's

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<v Speaker 3>been growing at record highs. California wildfires maybe forty billion itself.

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<v Speaker 3>The storm that we're facing here is now projected to

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<v Speaker 3>be a billion dollars, so not as much as some

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<v Speaker 3>of the disasters that you just talked about. But the

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<v Speaker 3>way that we help companies and clients work with the

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<v Speaker 3>deal with this is not just coverage. It's about building

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<v Speaker 3>reziscy in California, wildfires in some of those places prepared.

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<v Speaker 3>It's about preparing for it. And we have the expertise,

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<v Speaker 3>the engineering, the insight and analytics to be able to

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<v Speaker 3>help you take the actions to help you become more

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<v Speaker 3>resilient and prepare for that.

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<v Speaker 1>I'm so glad we could get you in before January

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<v Speaker 1>was over. Thank you. Edmund Reese over at aon