Aon Corp. (AOC)

Q2 2010 Earnings Call

July 30, 2010 08:30 am ET


Greg Case - CEO

Christa Davies - CFO


Keith Walsh - Citi

Jay Cohen - Banc of America/Merrill Lynch

Meyer Shields - Stiefel Nicolaus

Jay Gelb - Barclays Capital

Dan Johnson - Citadel Investment Group

Matthew Heimermann - JPMorgan



Good morning and thank you for holding. Welcome to Aon Corporation's second quarter 2010 earnings conference call. (Operator Instructions) It is important to note that some of the comments in today's call may constitute certain statements that are forward-looking in nature as defined by the Private Securities Reform Act of 1995.

Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. Information concerning risk factors that could cause such differences are described in the press release covering our second quarter results, as well as having been posted on our website.

In connection with the proposed transaction between Aon and Hewitt, Aon has filed a registration statement on Form S-4 on July 26, 2010, which also constitutes a preliminary joint proxy statement for Aon and Hewitt. It contains the preliminary prospectus for Aon.

Before making any voting or investment decision, investors and stock holders are urged to read carefully in its entirety the definitive joint proxy statements, prospectus regarding to propose transactions and any other relevant documents filed by either Aon or Hewitt with the SEC when they become available. They will contain important information of proposed transactions.

Now it is my pleasure to turn the call over to Greg Case, President and CEO of Aon Corporation. Sir you may begin.

Greg Case

Thanks very much and good morning everyone and welcome to our second quarter 2010 conference call. Joining me here today is our CFO Christa Davis.

To begin, this was an incredibly exciting quarter, highlighted by the recent announcement of our pending merger with Hewitt, creating Aon Hewitt, a global leader in Human Capital Solutions and in addition to that, the beginning of our four year partnership with Manchester United which will substantially strengthen Aon's brand recognition around the globe. Against this backdrop, these great highlights our team is proud to deliver results to represent a strong quarter of continued progress and momentum.

As we said before, irrespective of economic conditions, the soft market or other challenges outside our control, we continue to execute on our plans to substantially strengthen our firm positioning Aon as the preeminent global professional services firm in the world focused on risk and human capital solutions.

Consistent with our previous quarterly updates, I would like to cover three areas before turning the call over to Christa for further financial review. First is our performance against key commitments to shareholders, second is continued areas an investment across Aon, including the brief update on the progress of Aon Hewitt and third is overall organic growth performance.

On the first topic, our performance versus commitments, each quarter we measured our performance against the three metrics that we committed to shareholders to achieving over the course of the year to grow organically, expand margins and increase earnings per share.

In the second quarter, organic revenue declined 1%, an improvement from a negative 3% in the prior quarter as consulting delivered positive organic revenues for the first time since Q1 of 2009 and brokerage delivered significant improvement with organic growth coming from key areas such as Latin America, Asia Pacific and benefits from our GRIP platform.

Adjusted operating margin increased to a 110 basis points, highlighted by 200 basis point improvement in brokerage as strong operational performance offset a modest decline in organic revenue and produce share investment income. EPS on an adjusted basis increased 7% to $0.81, represented of a strong operational performance and effective capital management in a challenging macro environment.

Overall, a solid quarter of operational performance as we continue build and strengthen our client's earnings capabilities, focused on what we believe are two of the most important topics in the global economy today - risk and people. Well, we believe we are exceptionally well positioned to capture this opportunity.

On the second topic, further areas of investment, we believe we are in a unique position. Solid operating performance combined with expense discipline and a strong balance sheet continues to enable substantial investment in colleagues and capabilities. While we got significant opportunity remaining to deliver cost savings under our restructuring programs, we continue to build on our leadership position and industry leading capabilities.

Just a few examples, in brokerage, we are investing in innovative technologies such as our global risk inside platform and FAConnect to ensure that clients have seamless access to the best of global Aon in every local region around the globe. In fact, GRIP recently completed its 500,000th trade, highlighting the unique value of this platform.

We are also investing in additional capability as the risk continues from increasing in size and complexity around the globe but acquisitions such as Allied North America and FCC Global strengthening our industry leading construction capabilities as well as the acquisition of Carpenter Moore, strengthening our capabilities and professional liability.

We are also investing in client leadership to drive greater productivity and efficiency with the roll out of the revenue engine in EMEA and Asia-Pacific. Our Aon broking platform to better match client needs to ensure an appetite for risk and Client Promise, which is driving greater retention rates in ensuring clients fully understand our value proposition in a completely transparent way. And while we're just beginning to realize the positive impact in these investments, we believe we'll begin to see increasingly greater benefits as move into 2011 and 2012.

Read the rest of this transcript for free on

If you liked this article you might like

Towers Watson & Co. - Analyst/Investor Day

Towers Watson & Co. - Analyst/Investor Day

Cresud's CEO Discusses F2Q12 Results - Earnings Call Transcript

Cresud's CEO Discusses F2Q12 Results - Earnings Call Transcript

Ocean Power Technologies Management Discusses Q1 2013 Results - Earnings Call Transcript

Ocean Power Technologies Management Discusses Q1 2013 Results - Earnings Call Transcript

Microsemi Corporation - Analyst/Investor Day

Microsemi Corporation - Analyst/Investor Day

Lattice Semiconductor's CEO Presents At Deutsche Bank's DbAccess 2012 Technology Conference (Transcript)

Lattice Semiconductor's CEO Presents At Deutsche Bank's DbAccess 2012 Technology Conference (Transcript)