Q3 2012 Earnings Call Transcript

Transcript Call Date 10/26/2012

Operator: Good morning, and thank you for holding. Welcome to Aon Plc Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode until the question-and-answer session of today's call. If anyone has any objections, you may disconnect at this time.

I would also like to remind all parties that this call is being recorded and that the information to note that some of the comments in today's call may constitute certain looking 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 as described in the press release covering our third quarter results, as well as being posted on our website.

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

Gregory C. Case - President and CEO: Thank Catherine and good morning everyone. Welcome to our third quarter conference call. Joining me here today is our CFO, Christa Davies.

Consistent with previous quarters, I'd like to cover three areas before turning the call over to Christa for further financial review. I will 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 strategic investment across Aon. On the first topic, our performance versus key metrics, each quarter we measure our performance against the three metrics we focus on achieving over the course of the year; grow organically, expand margins and increase earnings per share.

Turning to Slide 3, in the third quarter, organic revenue growth was 4% overall, driven by improved rate of organic growth in both Risk and HR Solutions. Operating margin increased 30 basis points and savings related to our restructuring programs and operational discipline absorbed continued investments we are making in new growth opportunities and in key talent across our businesses.

Finally, EPS increased 8% to $0.95 reflecting solid operating performance and effective capital management. Overall, the focus remains on annual performance and achieving these metrics over the course of a year. However, I would note that our third quarter reflects improvement in each of our three metrics for the first time since the beginning of 2009 that we delivered this result in a single quarter. Christa will provide further and additional financial commentary in a few minutes reinforcing that we are on track with our long-term targets and have continued to take significant steps to further position the firm for long-term growth, strong free cash flow generation, and increased financial flexibility.

Turning to Slide 4, on the second topic of growth, I want to spend the next few minutes discussing the quarter for both of our segments. In Risk Solutions, overall organic revenue growth was 3% compared to 2% in the prior year quarter with growth across every major business. As we've discussed previously, we're driving a set of initiatives that are strengthening underlying performance and positioning our Risk Solutions segment for long-term growth and improved operating leverage, with management of our renewal book through client promise and retention rates of 90% or better on average, highlighting strong client satisfaction; new business generation of more than $230 million across our Retail business, with double-digit new business growth in many markets globally across Asia and Pacific regions; investments in new product and service capabilities with the rollout of GRIP and Aon Broking globally; and in our core treaty reinsurance business, net new business trends have now been positive for six consecutive quarters.

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