Aon (AON) Q4 2011 Earnings Call February 03, 2012 8:30 am ET Executives Gregory C. Case - Chief Executive Officer, President, Executive Director and Member of Executive Committee Christa Davies - Chief Financial Officer and Executive Vice President Analysts Raymond Iardella - Macquarie Research Keith F. Walsh - Citigroup Inc, Research Division Brian Meredith - UBS Investment Bank, Research Division Michael Nannizzi - Goldman Sachs Group Inc., Research Division Dan Farrell - Sterne Agee & Leach Inc., Research Division Adam Klauber - Macquarie Research Jay Gelb - Barclays Capital, Research Division Yaron Kinar - Deutsche Bank AG, Research Division Meyer Shields - Stifel, Nicolaus & Co., Inc., Research Division Michael Zaremski - Crédit Suisse AG, Research Division Presentation Operator
Previous Statements by AON
» Aon's CEO Discusses Q3 2011 Results - Earnings Call Transcript
» Aon's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Aon's CEO Discusses Q1 2011 Results - Earnings Call Transcript
Consistent with previous quarters, I'd like to cover 3 areas before turning the call over to Christa for further financial review. And we'd note that there are slides available on our website for you to follow along with our commentary today. First is our performance against key metrics we communicate to shareholders; second is overall organic growth performance; and third is continued areas of investment across Aon.On the first topic, our performance versus key metrics. Each quarter, we measure our performance against the 3 metrics we focus on achieving over the course of the year: grow organically, expand margins and increase earnings per share. Turning to Slide 4. In the fourth quarter, organic revenue was 3% overall, with growth across Risk and HR Solutions highlighted by 4% growth in both Reinsurance and Outsourcing. Adjusted operating margin decreased 70 basis points, driven by an increase in intangible amortization expense over the prior year. And finally, EPS increased 15%, driven by strong underlying performance and effective capital management. For the full year, organic revenue growth was 2% overall, an improvement from flat in 2010 and minus 1% in 2009. Adjusted operating margin decreased 180 basis points, which includes 140 basis points of intangible amortization impact and the inclusion of Hewitt results. Finally, EPS increased 5%, driven by strong underlying performance and effective capital management. Overall, we finished the year with improved organic revenue across our business, delivered cost savings, took significant steps to strengthen our firm and are effectively allocating capital, giving us both excitement and confidence in our ability to drive improved performance across our key metrics in 2012. Turning to Slide 5, on the second topic of growth. I'm going to spend the next few minutes discussing the quarter for both of our segments. In Risk Solutions, overall organic revenue growth was 3%, with growth across all major businesses. As market-related conditions continue to stabilize, we're driving a set of initiatives that are strengthening underlying performance and positioning our Risk Solutions segment for long-term growth and leverage to an improving economy, with management of our renewal books through Client Promise and retention rates of 90% or better on average, highlighting strong client satisfaction; new business generation of nearly $280 million across our Retail business, with solid growth across many markets, including China, Latin America, New Zealand and The Netherlands, just to name a few, highlighting the strength of our global client serving capability; investments in new products and service capabilities with the rollout of GRIP, Aon Broking and Client Promise globally; and in our core treaty reinsurance business, net new business trends have now been positive for 3 consecutive quarters.
Reflecting on individual businesses, in the Americas, organic revenue growth was 3% as pricing and exposures are relatively flat. We saw solid new business growth in both Canada and Latin America and strong management of the renewal book portfolio, utilizing Client Promise in Latin America and the U.S. Results reflect strong performance, overcoming continued market weakness in the commercial construction sector. On the international side, organic revenue growth was 1% as pricing was flat to modestly down on average, with firmer pricing in catastrophe-exposed regions, really a strong performance given the plus 6% in the prior-year quarter. We saw strong growth in emerging markets and across Asia-Pacific, including double-digit growth in areas such as Thailand, China, Japan and Malaysia. U.K. and Continental Europe continue to be pressured as economic conditions remain fragile across many core markets in the region.Read the rest of this transcript for free on seekingalpha.com