Greg Case - CEO Christa Davies - CFO Analysts 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 Presentation Operator
Greg CaseThanks 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 seekingalpha.com