Aon plc (AON) Earnings Call Transcript & Summary

Good afternoon. Thank you for joining us for today's presentations of the insurance labor market study. We'll begin in just a couple of moments, but a few housekeeping items. If for any reason, you have some issues with any of these systems, we would just ask that you please restart using the link provided. If for any reason, you have challenges with audio, again, you can certainly dial in using the telephone number that's provided as well. Keep in mind that if you do have some questions during today's presentation, we'll make every attempt to address those on the call. So please submit those using the QA option on the tool bar provided. And again, we will try to make those answers while we are in the presentation or at the very end. Outside of that, I just wanted to also let everybody know that we will be distributing the results presentation along with all of the other materials and recordings over the next couple of days. So be on the lookout for an e-mail coming out through that. So at this point, I'd like to present Jeffrey Rieder, Head of STG's performance benchmarking group with Aon to kick things off.

All right. Thanks, Vince, and good to be with everybody here today. We'll just briefly for those not familiar with Ward and STG within Aon. We are a benchmarking division that specializes in the insurance industry performing various levels of staff compensation and expense and business practice benchmarking. For more information, you can feel free to visit our website there, and I'll turn it over to Jeff Blair, who is from Jacobson Group.

Hello, everybody. Thank you for joining us this afternoon. Quick -- a little bit of info about the Jacobson Group. Jacobson Group is the leading provider of talent in insurance industry, and we offer executive search, professional recruiting, temporary staffing and interim experts. So virtually any need that you might have, you can capitalize in the insurance industry and also feel free to visit us online.

All right. Jeff, go ahead and kick us off. And I think for everybody here, it's welcome to you. I think handing over from Greg Jacobson. So we're great to have you on the study today or presentation today.

Thank you. Big shoes to fill. We'll see how I do. Okay. So just overall, some of the objectives of our study is to analyze current labor trends and future staffing expectations in the insurance market, provide an overview of some of the staffing challenges that we're seeing and that we shared with us through the survey by discipline and also provide some commentary on the industry's overall labor market.

Once again, I'd like to thank all our participants on the call. We've had a strong participation again for this survey. As you see, we have a nice mix across business sector and also by company size, which I think has given us some pretty robust results to share with you today. Go to the next slide. Excellent. So now we're going to start hitting it with the data to help you understand where we are. Good place to start is to see how the overall unemployment rate has behaved over the past year and how the trend is going. The industry unemployment rate continues to stay below overall national averages. And just to give you some perspective, over the course of 2024, if you average the unemployment rate in the insurance-related sector, it was 2.1% which is only up from 2.0% last year. So remaining below the national averages and fairly flat year-over-year. And if we look at the overall insurance carrier employment remaining relatively flat over last year, and still coming down from the peak of pre-COVID.

Okay. Yes, I think as we look at the kind of revenue expectations too, it's very interesting to see how this is changing over the last few years. The decrease in staffing there on left, actually increase in staffing and decrease in staffing, only about 12% of companies are responding that they're expecting to decrease staff over the next 12-month period and about 13% are expected to maintain. When you look at that with the 55% expecting to increase staff, how that correlates to the revenue expectations. This has been interesting for many of you that may have participated in some of these studies in the past, we saw that the expectation to grow staff and revenue were very highly correlated. But that is moderating a bit, where with 74% of companies expecting to grow revenue over the next 12-month period, only 4% decreasing. Normally, if we were looking back 10 years ago, we'd see that typically that had a direct correlation of almost, we'll say roughly 60% to 70% expecting to increase staff. And that's not really holding true here in the last, really, 3 cycles now of the study. And as we move to the next slide here, we can see that the -- how this is changing over the time period that despite the revenue growth expectations, 55% expecting gross staff, it is up slightly, but really, it's a relatively small number. And you can see it's down significantly from where we were kind of emerging from the pandemic, still at 55%. That tracks about on par with what we've seen over the last, let's say, a 10-year period. And for many of you, you may recall, we started the study back in 2009 as we were emerging from the recession at the time. But one other perhaps a bit of a surprise is still seeing the percentage of employees that are expecting to decrease staff at 12%. And I think there -- as we go through here, we'll see that there are perhaps different factors that are impacting that.

We've had a lot of questions that came through in terms of the impact of artificial intelligence, automated processing and how that's impacting certain areas? In general, the automation that companies have put in place really, those major system changes that occurred, say, since 2015 and still continue, we are seeing that those are having some significant improvements around areas for policy processing, data entry. Certainly, we have things that respond to policyholder inquiry, billing inquiry that can be handled through chatbots and other tools like that. So there still is that perhaps somewhat impacting the staffing plans are that companies are expecting to still gain greater efficiency. Also, as you think about, particularly for the property and casualty market, that much of the growth in revenue that has occurred over the last 3-year period has been more related to growth in rate rather than growth in unit counts. So to some extent, as companies have repositioned their portfolios specifically those companies that have exited or paused on their personal lines writings. These are perhaps still coming through that. Now they see that with fewer policies, means there are fewer claims, there's fewer calls and things like that, that still appear to be impacting the staffing levels. And then the last piece I'll add to that is, despite the improvement in the general economy associated, we recover from the hyperinflation in 2023 and that there still is some uncertainty around profitability. And in the fourth quarter, we know that the storms that came through with Milton, Helene challenged those carriers that were operating in the south. And then we know that the wildfire is having a significant impact in California and related exposures there still remain a challenge. So I think broadly, while we are seeing some, I'd say, pause in terms of significant increases in headcount, that may be just more broadly due to good but still perhaps a little bit of uncertainty in the overall financial situation here.

Okay. Talk a little bit -- I'd like to share a little bit about the 12-month staffing plans regarding the increase versus expected revenue growth. 74% of the companies that we surveyed are expecting revenue growth. And while this is a significant number, it is down a little bit from last year, and nearly 50% of the responses increases are really being live at the feet of increased market share, which is really driving growth. There is a slight increase in the number of companies expecting to decrease revenue year-over-year, and this tends to be focused in the personal lines, carriers or the P&C carriers that have a balanced portfolio, including personal lines, and it really ties into what Jeff was sharing the impacts on the personal lines business in the last year. From a staffing standpoint, 12% expect to decrease staff size, which is down from July. So I think overall, less companies are looking to do that. Expected increases in staff are highest in our P&C commercial carriers and our balanced carriers. Additionally, the national carriers seem to have a bigger plans for increasing staff. Expected reductions in staff are highest in personal lines and also in life and health care. One of the things that struck me as I was reviewing this chart is, overall, the folks that are filling out our survey do a pretty good job in projecting. I think what you're finding is the overall staffing plan for 2024, we're fairly close. Now you're always going to get -- did maintain as some are going to slip above, some are going to slip below. But what we saw is more than twice as many companies added staff than reduced staff last year. And I think you can see that through the chart. Okay?

Yes. I think the piece here is we're looking at some of those staffing expectations. One note, you kind of see the vast difference, if you will, between the actual staffing and plans between the life and health industry there on the right versus the P&C industry on the left. But the biggest change was just looking at what actually happened versus the expectations last year only at the life side with 40% of respondents decreasing was a pretty notable difference. The other piece that we also saw on the P&C side, similar trends, not quite to the degree that we saw on the Life and outside, but 19% of companies actually having a staffing decrease compared to what was expected to be like 10%. And in some cases, we know that there were some of the larger companies that were public about the information and some of the decreases. But I think one of the larger things that we see as a common theme going through here is just on that kind of portfolio rebalancing that happened on personal lines, that really had a significant impact for a lot of companies. What was unique though, for 2023, I'll say unique, but different compared to the prior years. In 2021, '22 and '23, companies were not able to meet their staffing plans because of the very significant recruiting challenges. There was a lot of turnover that was occurring. And as you'll see here later, turnover still remains high, but it has improved. But where in the past, some of the challenges for companies to meet their staffing plans was due to their inability to recruit and onboard people as quickly. Now we're seeing that in 2024, this is likely more reflecting what I would to be trying to maintain efficiency in their expenses and reducing head count intentionally versus not being able to meet their staffing plans. And then on the next slide here, too, this just gives a view in terms of the job openings in insurance and finance more broadly. So we'll see that the job openings here have relatively kind of consistent with what we're seeing. They're down a little bit from 2023 in terms of the annualized average only going from 346,000 to 342,000 but we did note that in December, specifically, that number has dropped to 291,000. While that is, we'll say, roughly 50,000 fewer openings at the end of December 2024, that has historically been consistent in most years that the December number is generally lower than the overall annualized average. So I guess the general theme here that we're seeing emerge is there's probably going to be a bit more well I say, stability in terms of hiring. We probably won't see massive increases in those hiring expectations. And I also do want to touch on that as we think about -- we talked a bit about the property and casualty segment. But in the life segment, there had also been a lot of companies that have also done some of the change, we've seen some mergers, obviously, merger, but acquisitions and sale of businesses recently from a number of companies, whether it's getting -- exiting portfolio transfer risk transfer. We've seen some that are getting out of the employee benefit space and things like that. So a lot of this appears to be kind of that shifting more broadly where companies are focusing on their core businesses. But pretty interesting just to see that the trends here kind of moderating quite a bit from that peak in 2022. All right. And then I know on this slide here, we're looking at the kind of expectations for 2024 compared to 2025. So this is again looking at that January to January lift there. One thing I'll note is the percentage of companies that are decreasing employees has still been pretty consistent in terms of what their expectations are. We're just seeing that the number of companies that are maintaining size there, just grew slightly. And what's really interesting is that when companies are expecting to grow, we're generally in that, say, 0% to 9% range in terms of total headcount. But overall, it's been pretty consistent here in terms of looking at the staffing plans in aggregate compared to just about a year ago. And Jeff, I think one of the things -- one of the questions that came through here is, are we expecting any changes in hiring as it relates to any of the kind of recent changes from the government, whether it's the impact of tariffs or anything like that. I don't know if you've seen from your view, kind of hands on the ground. Has that changed anything directly in terms of what you're seeing more recently in any of these figures?

I have not seen anything on the ground. I think the uncertainty has probably caused quite a few meetings and there's a lot of discussion. But at this point, we haven't -- I haven't seen anything because I think there's a lot of unknowns that still need to be worked through.

Yes, I agree with that. We have seen particularly as it relates to some of the concerns around tariffs, again, just adding to a little more uncertainty that is giving some companies some pause -- the biggest challenge that, that could have, particularly for property casualty companies is on the impact of claims. And similar to what we saw in 2023 with the hyperinflation some of these tariffs could also cause those claims cost to increase. And I wonder if that's going to give some further pause to companies going forward as well. But great question. All right, Jeff, I'll let you get back to this question here on the slide here.

So if we look at the 12-month staffing plans here, what we're seeing is overall that there is a plan to increase staff in property and casualty. And you see even higher for those that we spoke to on the life health side. But what's interesting -- what I found interesting is it really seems to be a tale of 2 cities with life and health because we have the highest group of increasing staff, and we also have the highest in decreasing staff. So I think there's pockets here and some of the different things that these companies are facing in the market and some of the issues that Jeff brought up previously, I think, really point to, it really starts to become specific to those lines of business. Again, it's going in from a property and casualty standpoint, relatively flat year-over-year, but a slight increase on the increase in staff -- and again, tying back to something we provided earlier, it's really about gaining market share, which is driving us.

Yes. I think on -- as we look at the impact on some of these figures by company size as well, we essentially have broken this out between small being companies under 300 employees, medium 300 to 1,000 and then over 1,000. And what's interesting to see here in for whatever reason, this has been a consistent theme in terms of when we look at companies that are expecting to decrease employees. You'll see that the larger companies typically are more on that end. What is unique, though, with this year was 15%, that's marked by the gray bar there. What is a bit unusual is that while the large companies were most likely to decrease, we also saw that they were the most likely to increase at 64%. And so this has been a little bit different than what we've seen in the past that the large companies have a little bit more disparity in terms of those that are increasing or decreasing. But overall, since the July study of this has been done semiannually here, expectation to add staff increased by about 3 points. And again, with the larger companies dominating that as well. And 1 comment I should mention, too, with the market share, for a lot of companies as they're thinking about what their market share would be, in most cases, that typically has been around their -- in this is year cycle, I say around their core product offerings, whereas in prior years, we were seeing companies that were trying to expand into new geographies, new territories. I don't think we'll see quite as much geographic expansion in 2025 that we had seen in prior years. In fact, I think we'll see more consolidation as companies have announced exiting whether it's states like California, Florida, Texas or other areas that have been more prone to catastrophe activity. And so this might may be also impacting these numbers here.

So regarding the use of temporary employees for the next 12 months, as you can see, 80% were saying they maintain it and increase is 8% and decrease is 12%. What was interesting is the most significant projected increases in temp usage were in personal lines and P&C carriers that also have a balance with personal lines, which is interesting because there does appear potentially to be a little bit of reducing permanent head count through decreases in staffing, but there may be an increase as needed for temps to fill in, and this can particularly be the case if some of these reductions are in the claims organization and during catastrophes, you can increase with temp. The most significant reduction in temp usage was in the life and health care business, where clearly, that came across it was significantly higher than what we had seen in the other lines of business. But overall, this is fairly consistent to what we've seen in the past. Interesting when you look at the voluntary and involuntary turnover rates, voluntary turnover rates results are down year-over-year. so a little bit down. And also as an industry, I mean, these numbers compare very strongly to the turnover rates that you would see in voluntary in a broader professional services, which will be north of 13%. So differences in those businesses, but again, professional services. Involuntary turnover has also remained steady and also continues to appear stronger than professional services, which tends to be more in the 6%, 7%, 8% for involuntary turnover. Some of the changes you see between the 6 months and 12 months is really hitting when actions may have taken place, which can impact sort of the numbers depending on when you're looking at them. But again, the trend is the combination of job openings are remaining about the same, turnover is still within the range that we expected last year and then this year. So there is a very calm market from that standpoint and not an over significant amount of churn. I think also, you tend to see voluntary turnover go down a bit across industries and then also in the insurance industry, when there's more onshore feelings about the market going forward from an employee standpoint. So I think with all the things going on with the economy. I think maybe there's a reduction also in voluntary turnover as people are tending to want to stay with the jobs that they have.

Yes, I think what's interesting, too, with that kind of 4.1% or so on the involuntary turnover, at least at the 12-month figure there. Historically, as we've been kind of tracking involuntary metrics, really since dating back to around 2005, normally, in most years, that typically hovered around 1.5% to 2%. So at 4%, it is still relatively about double what it was. I do think that there are 2 components that could also be driving this. One is more rigor around the performance management and expectations for employees. That has come up quite a bit, particularly in the virtual or hybrid work environments, that companies have seen certain employees perhaps not performing well in that environment. And then the second, again, I'll touch on is as company has been making more improvements in their operational systems and processes, they tend to find that, that means that there's areas that are candidly just overstaffed as well. So my expectation is that we will see this involuntary turnover remain a little bit higher compared to those, we'll say, 20-year historical averages probably throughout 2025 as well.

Yes, I think that's a good point. And while the pandemic might seem like it was a long time ago, if you look at the surge of employment that took place, it is only natural that we would find the new stasis point. And especially as people are coming back into the office, there may be some also additional understanding there might have been some over hiring and that has led to some of this also.

Yes. That's a really good point, too, because we saw earlier where there was those huge spikes where companies were expecting to grow and grow profitably. That really probably hasn't materialized to the way they anticipated in 2021.

Right. Okay. Okay. So if we look at sort of notable survey trends, overall employment in the industry has remained stable, growing 1.17%, which is slightly below what we had -- what was anticipated as we've touched on a number of times, companies with personal lines in their books have been more volatile. I mean it's been sort of the headlines in the market. And personal lines companies are expecting further decreases in the 12-month head count compared to 2024. And a big piece of that is when you exit markets, and particularly in the personal lines, and based on the headlines that is going to be a piece and from some of the discussions we've been having, that is -- we're going to see more of that in the coming months. The total industry 12-month turnover both voluntary, involuntary is slowing down. But again, it is really based on which market segment we're speaking about. Well, one of the things, when I look at this and we look at the results, regardless of the level, there are challenges in recruiting. Recruiting has become more difficult for all the reasons that we have a very well employed employee population with low unemployment which scales -- it makes it more difficult at times to fill roles. What we're seeing is the difficulty persists in 6 out of the 11 categories we're seeing from your feedback, more difficulty in hiring. I'm seeing the same thing on the executive level and the challenges of getting high-quality candidates to switch companies is a bit more challenging and has been more challenging. But again, I think the areas, actuarial and executives are at the top and those match our experiences at Jacobson.

Yes, I think what's really interesting here too is that technology has dropped to the fifth number. And all through -- we'll say, off through 2000 to 2020, it felt like that using technology was the #1 area most difficult to recruit for. Every now and then it would drop down to #2. It's just interesting to see how much further it's dropped. I also think that as you look at areas like certainly actuarial analytics and then the underwriting, what I would call is really the bread and butter for the core insurance value offering in terms of how company you're trying to think around their product management approaches, certainly the analytics and actuarial that are being used to model risks, especially with the heightened wildfires and tornadic and severe convective storms. So I think a lot of that is really driving some of the core -- kind of core insurance skills that you think you want to maintain. Unfortunately, for me, being a CPA and accountant by background, I guess, accountants are pretty easy to find, but I still hold out there for our accounting brothers there at the bottom.

Well, I would say that if we -- based on my experience, if we were buying in technology and executives for technology executives, they would give actuarial run of fruits money for difficult positions to find.

All right. Yes, this slide then just talked about the ability to hire from a year ago, compared to a year ago and really an amazing slide here. That only 14% of companies said it was worse, either 11% at moderately or 3% at significantly worse, whereas the vast majority here, 65%, responding that it's about the same. So the piece here really is there was a period of time, particularly in 2023 and '22 for that matter, we were seeing companies responding to that, everything was just substantially worse and much more difficult. What also is perhaps telling in all these trends, we haven't touched on the compensation aspects and how this is changing that as well. The average compensation in terms of merit increase across the insurance, this is true for both the Property Casualty and the Life, Health and annuity segments was typically around 4.2% for merit increases in 2022 and 2023. In addition to that, we were seeing companies make significant market adjustments. So overall, year-over-year compensation was changing about 5% on average. As we fast forward going into 2025, we're now expecting that those merit increases are likely to be closer to 3.2% to 3.5% at median, which is getting us back to where we were in the mid-2010s. The other piece is that the number of market adjustments has changed dramatically, too, both in terms of we'll say that the magnitude of those market adjustments and the rules in there where there'll be significantly less mid-market -- midyear market cycle changes in compensation. But with that, I do want to put one other color aspect is that incentive compensation still remains a high priority in terms of how companies have put that into their plans. So we're seeing short-term incentive plans being offered typically to all levels of employees, down to the frontline individual contributors, and then we've seen for -- on the executive piece kind of tie back to the recruiting piece on the slide earlier, a growing number of companies that are introducing long-term incentive compensation plans to their executive populations. And historically, for a lot of the mutual companies that are participating on this call, there was perhaps 10, 15 years ago, only 10% to 15% of mutual companies had those long-term incentive plans, whereas now it's more likely that closer to 60%. And certainly, once companies get over $1 billion in premium it's a dominant practice that all those companies would have a long-term incentive program. And that's really all these changes in incentive compensation are really to create competitive compensation programs to -- that companies can attract talent. All right. And I know a question came -- we don't have a compensation slide in here directly. But we do separate compensation study, but we didn't pull that into this labor study specifically. All right. And then, Vince, I think if we can move on to the next slide here, and that I'll talk about the increase in staff. And Jeff, I'll hand it back to you.

Okay. This gave an interesting look. I mean one thing that jumped out is technology is back here, particularly -- I'm sorry. Sales and marketing and executives are the only 2 that were -- that our results came back is increasing likelihood year-over-year. And I think the sales part makes sense, particularly because of the focus on growth. And I think additionally, large and medium-sized companies are most likely to hire the technology roles in the next 12 months. And I think that's really about, again, trying to achieve these efficiencies using new technologies, and there may be a bigger budget to expand and invest in these things where the smaller companies, while technology is on the list, claims tends to be a bigger piece. Technology leads from a likelihood of increasing staff for life health also. And again, I think there are consistent opportunities that the industry sees in these investments in both serving our insureds, our clients better, but also changing how we deliver our products. So again, I think really technology staff, underwriting claims are the -- continue to be the greatest needs, which are the core of the business.

Yes. I think one thing that could be interesting is certainly, you can see the technology kind of spike for those balanced P&C-focused organizations. To some extent, we are seeing that we're, again, the last 10 years, a lot of the technology additions to staff often related to core system replacement or upgrade enhancements. Some of those systems have been now replaced with cloud-based solutions which means that a lot of the development maintenance and even some of the infrastructure activities in technology are essentially gone because they're -- because of the cloud platform. My instinct and what we saw with some of the commentary that also came through from the responses is that more of the technology investments going forward will be perhaps addressing some of the artificial intelligence developments that companies are beginning to invest more heavily. And certainly, we know that the -- there's a lot of regulatory oversight in terms of how AI is being used, particularly around some of the underwriting and in some cases, the claims areas, but we are seeing significant advancements in fraud, areas like subrogation and just overall claims management that we do expect that to continue to be a higher proportion of the overall budget. So that could be what's driving some of that technology piece a little bit more here in this year's cycle.

Yes. That's a good point. And one of the things that I know has been coming up in a lot of conversations for leadership roles in MGAs and underwriting situations is the executives understanding and sort of openness to how technology can be used to eliminate some of the repetitive aspects or the lower level aspects of underwriting and really push the human part to the more complex risks and the more complex underwriting. But I mean, it's showing up in more and more conversations where in the past, technology wasn't part of the position profile we were putting together for these executives.

All right. Next we are showing that slide -- I should say the slide is just showing that change kind of year-over-year by study period. So I guess the biggest surprise is really just seeing how much it's come down since 2022. Again, consistent with everything else we were finding, but particularly around technology, just dropping so much over this period of a 4-year period. Yes. I think a question actually came through in the chat room, too, which is a great segue to this slide here is as companies were looking to add staff in the next year. Overall, only 16% of the staff were expected to be at an entry level. And there was a question that came through in terms of how the decrease in entry-level hiring is affected by the drop in birth rate that's kind of an interesting piece that could be tying here that -- because of the birth rate drop about 20 years ago that they're in the entry-level positions or people to fill those current roles. At 16%, this is the lowest number that we've seen for the entry-level positions in aggregate. And I believe this is about a 5-point drop from the 2024 study. What this means is that there's a lot of reasons that could be driving this. One, we saw that the higher levels of turnover that kind of persisted still in the last couple of years may mean that as companies are doing more involuntary turnover, that means there's positions available for companies to recruit from. And I've heard many anecdotal stories where companies operated by perhaps a national carrier that closed a call center or other activities that now they had the ability to hire from experienced talent locally that wasn't there as well. And not necessarily locally because the virtual and remote hybrid environment allows for positions to be filled anywhere in this case. But I was very surprised to see this large drop in the underwriting activities. The concerns I have is -- ties into that birth rate discussion, but more broadly around companies as they think about succession planning and building the talent pool for the future that this paints a little bit of a bleak story for the ability for the industry to create those roles going into the future. So just a very interesting and staggering piece here from my perspective, looking at this slide.

It's interesting back when I joined the insurance industry, decades ago, it is now. The joke was none of us majored in this, and here's where we all ended up in the insurance industry. And on the one side, it is now a college major. We are starting to create that. But I think bringing new people into the industry is a challenge that's faced by a number of industries. And I think there's a lot of effort being done and Jacobson is a sponsor or some of this, of how do we get the college campuses, get people excited and really recruit into the industry. so that we have that because just like many industries, we do have an aging population. This is proving already, we're starting to feel this at the executive side with increased retirements and the challenges in finding replacements. But these statistics start to give you the precursor of, are we hiring less entry because we need less or is it because we can't find them.

The one thing, too, is we added loss control. So this is more of a risk management loss control function about a year ago in here. And I was recently working with a carrier that as we were looking at the overall turnover levels in their population, their loss control/risk management function had the highest level of turnover, and they were also expressing challenges about just filling those roles. And when you look at an area like loss control that in this study view here, nobody responded that they were expected a higher entry-level employees. And obviously, that creates a significant challenge when you think about companies that are trying to either service their existing insurance clients, do that survey work, prebound, postbound type work that needs to be done on inspections and things like that, that it definitely creates a challenge to retain those employees. And then if everybody is going after experienced staff, that means that there's going to be an increase in compensation as you're pulling those employees away. All right. I'll get off my soap box there. So we'll go to the next slide. So as we look at some of those reasons that companies were expected to increase staff. Again, the anticipated increase in business volume was the #1 area -- #1 reason side, I should say. And that was followed by expansion of business or into new markets. In those new markets typically from the responses were generally commercial lines focused organizations. And then areas being understaffed was the #3 response here. So it kind of gives you a view in terms of when companies are increasing logically, these would be the reasons that you would expect that to be. On the counter to that, when we look at the staff decreases, here, we can see that, again, there are fewer companies there, only about 12%, 13%. But reorganization was an area that came up as the #1 response. A lot of times, those reorganizations as we talk about the companies that have gone through perhaps portfolio changes and things like that or if they're consolidating field offices that tends to mean that there are either fewer areas that they need additional management oversight, et cetera. But that reorganization has popped up a little bit higher, and this could be also an impact as companies think about their work model post pandemic and where that work is being performed, impacting that. And then automation, as we touched on earlier with the systems, was the #2 cited reason, which somewhat correlates with the area than being currently overstaffed as well. Also 7% of respondents here were saying that the contraction of business or discontinuing operations was also a driving factor. So we can -- I think a lot of those reasons that they're decreasing staff are somewhat intertwined because they tend to touch on pieces there. All right. And then the next couple of slides here, just talk about where the workplace flexibility. So the dominant practice with 83% of companies offering flexible work hours, and that has increased a little bit just with the kind of virtual hybrid environments that companies are comfortable now that employees can get their work done, even if it's on those 8, 9, 10:00, 11:00 at night, but we're seeing a lot of that being provided. And then the next slide here talks about more about the... On the next slide, if we can advance there, the required in office experience. And we can see that the changes here compared to 2024 is that in the gray compared to the current cycle in the blue, the number of days being worked in the office at 3 to 4 days per week in that hybrid environment has slightly increased compared to what it was a year ago. And again, this is kind of a tale of 2 cities to some extent because we also see on the far left that the percentage of companies that are expecting employees to rarely work in the office is also up 4% to 22%. So the kind of telling thing here in general, and we've seen this every day expectation in the office usually hover around the 4% or 5% range. Here, it was at 3% of companies expecting that in-office experience. So it's very -- I guess the broad theme is that the remote environment is -- or hybrid environment is likely here to stay whereas I would also say, when we see at 3 to 4 days per week hybrid work environment that its most typical companies were expecting a 3-day work experience in office. It kind of gives you a little bit of a view in terms of those in-office expectations.

I find this slide and this data, I find really interesting because this is a good example of if you just follow the headlines, it feels like everybody is going back to the office 5 days a week. And the reality is the headlines are the specific large companies that are doing it, but we're not -- this data is telling us that it's not as much a common theme. And more of what we're seeing is the hybrid approach as something more prevalent in our industry.

Yes, I'd agree with that as well. And then even here going forward, that expectation in terms of using the same model for the next 6 months, only about 10% of company will require employees to be in the office more than they currently are. And again, we saw it earlier, it's essentially going from a 2-day in-office experience to a 3-day in-office experience most typically. And we do know that there's a lot of even challenges with companies getting that extra day of employees in the office as well.

Yes. I think the #1 challenge from talking to folks that have been in this is, I now go in to the office twice a week to do my Zoom calls from there. And I think companies are still trying to figure out how do we make this effective with when people are in the office and not just make this decision without figuring out how to change the workflow. So a few closing thoughts for you to take away and some of the headlines, and I know we're going to be sharing the deck. But 55% of the companies we surveyed are looking to -- are likely to increase or plan to increase staff in the next 12 months. And life health is driving a significant part of that, and 12% is -- the companies are planning on reducing staff. And this is slightly higher than a year ago. As I said earlier, there is a skew towards larger companies are more likely to add staff in the next 12 months and this is from a little bit to significantly higher than small- and medium-sized companies. 74% of the companies expect to grow the revenue. which is still slightly lower than a year ago and Commercial Lines, P&C companies are the most optimistic of the segments we look at. And overall, 49% of the company stated that the change in market share will drive the expected revenue. And the primary reasons the company's plan to increase staff in the next 12 months, is an increase in business volume or to a slightly lesser degree, expansion of business or new markets. And reorganization is the #1 reason for companies that are considering reductions in staff.

And then when we look at the rules that are being and expected to grow; technology, underwriting and claims rules in that order are expected in the next 12 months. Loss control actuary product management and accounting are the areas where companies are most likely to add experienced staff as well versus those new entries which were more common in the claims in operational areas. In terms of the most difficult position to fill, actuarial executive and analytics. And then 14% of companies feel that the ability to hire talent has become more difficult. It's up slightly from July at 11%, but still smaller than what it was 2 years ago. And at 5.8%, the 6-month voluntary turnover is 2.7% lower than the 12-month average of 8.5%. So again, improvement there, but the involuntary turnover was also lower at 2.9% compared to 4.1% for 12 months. And we do expect that over the next 6 months period, 75% of companies will continue to work in that hybrid schedule, and then only 11% are changing their approach to require more employees being in the office more. And then lastly, just 3% of companies are requiring their staff to be in office every day, which was down from 6% in last year's study. And so as we look at the projections going forward for the next 12-month period. Overall, this would model out that we should see about a 1.08% increase in total industry employment over the next 12-month period. But we do see some disparity in terms of where that is. So on the Life Health side, we only anticipate about a 0.4% increase compared to about a 1.4% increase on the property casualty side. But no surprise, that is largely dominated by the commercial sector, which is going -- expected to grow at 2.4% compared to a negative decrease there on the personal line side. So a lot of interesting trends kind of models out with what we're seeing in the industry. Jeff, I had 1 question. I think as you were talking about the hybrid experience, too. The -- I know you're doing a lot of recruiting for executive roles specifically in helping companies fill that -- is there any change in terms of how companies are expecting where their executives are? Like are they -- do they want them in the office? Or how often are they allowing the hybrid or even virtual environment for those executive roles? And then does that change at all by the type of executive? Like is it different for an underwriting leader versus claims versus technology?

It's a good question. I think what we're seeing is, one, the more companies, if they have requirements for the nonexecutives, they are trying to not have a special deal for executives. So if they're requiring people to be in the office a certain amount, they really don't want to have haves and have-nots when they're doing their recruiting, especially if they converted executives they have into this. So I think that is 1 piece. I think the challenge is working remotely has become a perk. And if you are trying to attract an executive who is moving from a totally remote into an office scenario, that is likely going to spill into the compensation discussion. It's something that we're seeing more and more. And what's interesting is, I think there's less negotiation about it because, again, they don't want to create special circumstances for 1 executive if other executives and the wider team are following being in the office.

Okay. That makes sense. Well, great. Well, it doesn't appear that there's any additional questions that have come through. But we will be conducting this survey again in July. If you'd like more information on how to participate or have any general inquiry, you can certainly reach out to Jeff or myself and also Vince Albers is there at [email protected]. We really appreciate you providing your time today to participate here for all those that also complete the study, thank you very much. We know it takes a little bit of time to fill it out, but the insights and information that we gain from that is valuable, and we hope it helps inform the industry in terms of how you're thinking about your future staffing plans and operating model considerations. On behalf of Aon and Ward Group, thank you very much. And Jeff, I would like you to take away close.

Yes. Also, thank you for all those that joined us today, and for those that filled out the survey, really appreciate it. And hope we were able to provide to you the insights you were looking for. And I mirror with what Jeff said, feel free to reach out to either of us or Vince. If you have any questions or comments, we would love to connect with you. So thank you, everyone, and have a great rest of the day.