Aon Plc · NYSE:AON
Aon — Investor Day (February 2009)
31 slides from Aon's investor day presentation, Feb 25, 2009
Slide 1: Presenters: Greg Case, Christa Davies, Scott Malchow
GREG CASE Chief Executive Officer CHRISTA DAVIES Chief Financial Officer SCOTT MALCHOW Vice President, Investor Relations
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These
Slide 3: Agenda
Agenda Section 1: Who Aon is, and how we differentiate Industry Leader in Risk and Human Capital Advisory Specializing in Risk, in a Market that is Growing in Size and Complexity Largest Global Network and Capabilities Deep Management Team focused on delivering against 3 commitments Section 2: What
Slide 4: Aon: Industry Leader in Risk and Human Capital Solutions
Aon: Industry Leader in Risk and Human Capital Solutions #1 advisor on Risk Globally: Leading provider of leading human capital solutions: 2008 REVENUE $ billions $7.6 billion #1 Primary Insurance Brokerage #1 Reinsurance Brokerage #1 Captive Management Leader in Affinity Programs Leader in Human Ca
Slide 5: Complexity of risk is increasing
Complexity of risk is increasing Operating in Market that is Growing in Size and Complexity Source: AXCO Insurance Information Services BRAZIL CHINA GLOBAL Risk is both opportunity and downside protection Scrutiny of risk is increasing U.S. .... And Complexity Risk is Increasing in Size ... Non-Life
Slide 6: Natural Catastrophes are increasingly Global
Natural Catastrophes are increasingly Global
Slide 7: Aon has Largest Global Network
Aon has Largest Global Network Aon has Globally Diversified Revenue Brokerage Revenue - 2008, US$M Aon has largest owned Global Network U.S. 33% U.K. 16% EMEA 30% APAC 9% Americas (excl. U.S.) 12%
Slide 8: Aon - Industry Leading Content and Capabilities
Aon - Industry Leading Content and Capabilities Strong foundation and platform Demonstrated execution ability in good and bad economic conditions Unmatched retail brokerage network and capabilities Largest Global Network Broadest product portfolio Strongest technology platform Superior global servic
Slide 9: Agenda
Agenda Section 1: Who Aon is, and how we differentiate Section 2: What we have achieved over last 3 years Improved Operationally, Delivering on our 3 Commitments: Grown Organic Revenue Expanded PTI Margin Grown EPS Transformed Portfolio to Focus on Risk and Human Capital: Invested in Premier Reinsur
Slide 10: Delivering on Our Commitments to Shareholders
Delivering on Our 3 Commitments to Shareholders 1. ORGANIC REVENUE GROWTH 2. ADJUSTED PRETAX MARGIN* * See Appendix for non–GAAP reconciliation 3. ADJUSTED EPS GROWTH FROM CONTINUING OPS* 370 bps 2% 2% 2% 12.2% 14.9% 15.9% 22% 43% 25% 2006 2007 2008 2006 2007 2008 2006 2007 2008
Slide 11: Growth Organically in Last Quarters, Despite Negative Industry Pricing
Growth Organically in Last 13 Quarters, Despite Negative Industry Pricing Aon Brokerage Organic Growth CIAB P&C Pricing YoY Q3'01 Q4'01 Q1'02 Q2'02 Q3'02 Q4'02 Q1'03 Q2'03 Q3'03 Q4'03 Q1'04 Q2'04 Q3'04 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4
Slide 12: Progress: Continued Margin Improvement in 2008
Progress: Continued Margin Improvement in 2008 +100 bps CONSULTING* TOTAL ADJUSTED PRETAX MARGIN* RISK & INSURANCE BROKERAGE* * See Appendix for non–GAAP reconciliation +70 bps +220 bps 18.6% 17.9% 2007 2008 17.0% 14.8% 2007 2008 15.9% 14.9% 2007 2008
Slide 13: Brokerage Margin Improvement Towards Target of 20%+
Brokerage Margin Improvement Towards Target of 20%+ Note: Adjusted Pretax Margins for Risk and Insurance Brokerage Services segment. + 2007 = 17.9% 2008 = 18.6% 2006 = 16.1% 17.5% 18.5% 17.8% 17.3% 18.4% 19.5% 18.1% 16.8% 19.9% 20.0% Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Target
Slide 14: Progress: Improving Colleague Productivity / Efficiency
» Progress: Improving Colleague Productivity / Efficiency PRETAX INCOME PER COLLEAGUE* REVENUE PER COLLEAGUE* 8% 3% * See Appendix for non–GAAP reconciliation ** Excludes Benfield colleagues 13% 0% COLLEAGUES** 2008 – 28,255 2007 – 27,883 COLLEAGUES 2008 – 6,411 2007 – 6,335 CONSULTING $214 $221 $38
Slide 15: Transformation of Aon's Business to Focus on Risk and Human Capital
Transformation of Aon’s Business to Focus on Risk and Human Capital REVENUE Percent Divested $3B of lower margin Underwriting revenue (CICA, Sterling, Warranty and CPG) Grew Brokerage by $0.7B Acquired $0.6B of higher margin Reinsurance with Benfield Underwriting Consulting Risk 100% 100% 13% 18% 32
Slide 16: Invested in Premier Reinsurance Franchise – Aon Benfield
Invested in Premier Reinsurance Franchise – Aon Benfield KEY BENEFITS Creates an unparalleled reinsurance franchise with approximately $1.6 billion in combined revenue #1 in Treaty, #1 in Facultative and #1 broker in Capital Markets Transactions Total consideration for deal was $1.75B at announcemen
Slide 17: Agenda
Agenda Section 1: Who Aon is, and how we differentiate Section 2: What we have achieved over last 3 years Section 3: What we will do over next 3 years Continue to reduce cost: global functions driving efficiency Drive revenue growth through platform investment, new talent, markets, products, and sup
Slide 18: Restructuring Programs will continue to deliver substantial cost savings
Restructuring Programs will continue to deliver substantial cost savings Total Restructuring Savings* US$ Millions 78 273-306 454-464 492 Continued delivery of cost savings via: * Restructuring charge for 2007 Program is $550M by 2010. Restructuring charge for Aon Benfield Program is $185M by 2011.
Slide 19: Investing in New Markets and Talent for Future Growth
Investing in New Markets and Talent for Future Growth Primarily Focused in International Brokerage & Reinsurance » » NEW MARKETS and TALENT TECHNOLOGY Construction Environmental Reinsurance – Benfield, Gallagher Re, Facultative Marine Aviation Life Sciences Affinity Programs – Footman James, Latin A
Slide 20: Driving Revenue Growth via Global Platform Investments
Driving Revenue Growth via Global Platform Investments AON Built from 400+ acquisitions Industry leading content and capabilities FROM 2006 » SALESFORCE.COM One sales tool REVENUE ENGINE Market planning, customer feedback GLOBAL RISK INSIGHT PLATFORM Global real-time premium flow CLIENT PROMISE One
Slide 21: Excess Capital Primarily Distributed to Shareholders
» Excess Capital Primarily Distributed to Shareholders Contributed over $1B to pensions over the past 4 years Major pension plans were under funded by approximately $1.5 billion at 12/31/08 Expected pension contributions of approximately $400 million in 2009 Annual dividend of $0.60 cents per share,
Slide 22: Summary: Opportunities & Challenges
Summary: Opportunities & Challenges Greater client demands and needs Magnitude and complexity of risk is increasing globally Cost of volatility higher Aon well positioned #1 intermediary of both primary risk insurance and reinsurance Industry-leading network of global resources and capabilities A cu
Slide 23: Appendix
Appendix
Slide 24: Primary Operating Segment Background Information
Primary Operating Segment Background Information Risk and Insurance Brokerage Services Human Capital Consulting
Slide 25: Human Capital Consulting
Human Capital Consulting Rollout worldwide brand strategy Drive global service delivery strategy Complete rollout of centralized global revenue platform Drive local market planning Manage pipeline and productivity $ in millions HOW DOES CONSULTING FIT WITH BROKERAGE? KEY INITIATIVES ADJUSTED PRETAX
Slide 26: Risk & Insurance Brokerage Services
Risk & Insurance Brokerage Services #1 Primary Insurance #1 Reinsurance #1 Captive Management Leader in Affinity Programs Integrate merger with Benfield Group Roll-out Aon Client Promise and Global Risk Insight Platform (GRIP) Drive commission and fee lifts globally Complete local market planning Ma
Slide 27: Reconciliation of Revenue & Operating Income
Appendix – Page 1 Reconciliation of Revenue & Operating Income (millions except per share data) Risk and Insurance Brokerage Services Consulting Unallocated Income & Expense Total Revenue as reported 1,581 $ 342 $ 1 $ 1,924 $ Income (loss) from continuing operations before provision for income tax -
Slide 28: Reconciliation of Revenue & Operating Income
Appendix – Page 2 Reconciliation of Revenue & Operating Income (millions except per share data) Risk and Insurance Brokerage Services Consulting Unallocated Income & Expense Total Revenue as reported 1,627 $ 373 $ 6 $ 2,006 $ Income (loss) from continuing operations before provision for income tax -
Slide 29: Reconciliation of Revenue & Operating Income
Appendix – Page 3 Reconciliation of Revenue & Operating Income (millions except per share data) Risk and Insurance Brokerage Services Consulting Unallocated Income & Expense Total Revenue as reported 6,230 $ 1,358 $ 43 $ 7,631 $ Income (loss) from continuing operations before provision for income ta
Slide 30: Reconciliation of Revenue & Operating Income
Appendix – Page 4 Reconciliation of Revenue & Operating Income (millions except per share data) Risk and Insurance Brokerage Services Consulting Unallocated Income & Expense Total Revenue as reported 5,957 $ 1,352 $ 50 $ 7,359 $ Income (loss) from continuing operations before provision for income ta
Slide 31: Reconciliation of Revenue & Operating Income
Appendix – Page 5 Reconciliation of Revenue & Operating Income Twelve Months Ended December 31, 2006 Risk and (millions except per share data) Insurance Unallocated Brokerage Income & Services Consulting Expense Total Revenue as reported 5,530 $ 1,282 $ (42) $ 6,770 $ Income (loss) from continuing o