Aon Plc · NYSE:AON
Aon — Investor Presentation (February 2007)
32 slides from Aon's investor presentation, Feb 13, 2007
Slide 1: Greg Case, CEO and Scott Malchow, VP Investor Relations
Greg Case, Chief Executive Officer Scott Malchow, VP 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: Delivering Distinctive Client Value
RISK & INSURANCE BROKERAGE $5.6 billion 5% #1 Primary Insurance Brokerage #1 Reinsurance Brokerage #1 Affinity Programs #1 Captive Management Broadest Global Network of Resources & Capabilities Improving Operational & Financial Performance Returning Excess Capital to Shareholders Organic Growth Pret
Slide 4: The Magnitude of Risk is Increasing
The Magnitude of RISK is Increasing SOURCE: AXCO Insurance Information Services Russia China Global Complexity of risk is increasing Risk is both opportunity and downside protection Misunderstanding risk can be fatal Scrutiny of risk is increasing Non-Life Written Premiums ($ billions) 2.3 3.3 7.4 9
Slide 5: Broadest Global Network of Resources and Capabilities
Broadest Global Network of Resources and Capabilities Aon Presence Based on total number of subsidiaries with 51% or more ownership Focused on Integration and Alignment
Slide 6: We are Making Progress in a Number of Areas
Local Market Planning Revenue Management Increase Client Facing Presence Product Development & Innovation Opportunities Exist to Improve How We Deliver Value to Our Clients Drive culture of delivering distinctive value across all client activity Outsource or offshore non-client interfacing activitie
Slide 7: Deployment of Centralized Global Sales Database
Complete In Progress Deployment Planned Not Planned For Deployment Deployment of Centralized Global Sales Database 91% 91% 91% 90% 67% % of Brokerage & Consulting Revenue 54 54 54 52 38 # Countries 5,177 5,177 5,177 5,177 3,646 # Users 28 28 28 28 20 # Retired Applications Q4'07 Q3'07 Q2'07 Q1'07 20
Slide 8: Local Market Planning
COMMENTS Integrated systems are complex sales Transactional business: covered by generalists Sales training critical for key products Market value proposition development Regional support critical 2/1 3/1 1/1 1/0 0 1/0 1/1 0 1/0 1/0 1/1 1/0 GLC Companies / Underpenetrated #/# Industry Rank ($, 1-15)
Slide 9: Managing Pipeline and Productivity Information
Managing Pipeline and Productivity Information
Slide 10: Improving Employee Productivity
CONSULTING BROKERAGE Improving Employee Productivity Employees 2004 – 7,162 2005 – 6,835 2006 – 6,250 Pretax Income Per Employee* Revenue Per Employee* Employees 2004 – 30,881 2005 – 29,438 2006 – 28,882 Pretax Income Per Employee* Revenue Per Employee* see Appendix for non-GAAP reconciliation 7% 12
Slide 11: Increasing Organic Growth
Increasing Organic Growth Consulting Total Organic Growth Risk & Insurance Brokerage Underwriting (Accident & Health and Life)* based on net written premiums 11% 5% 2005 2006 5% 0% 2005 2006 4% -2% 2005 2006 2% -1% 2005 2006
Slide 12: Improving Client Satisfaction
Improving Client Satisfaction Source: UBS, December 2006 UBS surveyed 31 risk managers Companies characterized as upper middle market to large accounts, with public companies having market caps of $2.5 to $100 billion Aon gained the most ground with 24% of the first-place vote versus 14% in the prio
Slide 13: Clients are Relying on Aon for more than Traditional Brokerage Services
Issues Clients are Relying on Aon for more than Traditional Brokerage Services TOTAL COMPENSATION FROM CLIENT Case Example: Fortune 500 Biotech Concentration of physical assets and exposures Supply chain interruption Exposure to California earthquake Aon provided significant industry experience whil
Slide 14: Primary Operating Segments
Primary Operating Segments
Slide 15: Risk and Insurance Brokerage Services
#1 Primary Insurance #1 Reinsurance #1 Affinity Programs #1 Captive Management Risk and Insurance Brokerage Services Complete rollout of centralized global sales platform Drive local market planning Manage pipeline and productivity Reduce non-client interfacing activities Align London with global ne
Slide 16: Consulting
#2 US Employee Benefits #3 Global Employee Benefits Compensation consulting Management consulting Strategic Human Resources consulting Consulting Complete rollout of centralized global sales platform Drive local market planning Manage pipeline and productivity Rollout worldwide brand strategy Drive
Slide 17: Underwriting
Global sales force with 6,700 staff and field agents for AH&L business Distribution through door-to-door exclusive career agents Clients are primarily middle-income consumers Major products include accident, supplemental health, short-term disability and long-term health care $ in millions 94.0% 92.
Slide 18: Operational Excellence
Operational Excellence
Slide 19: Restructuring Program is Beginning to Deliver Benefits
Restructuring Program is Beginning to Deliver Benefits Restructuring Program RESTRUCTURING CHARGES ($ millions) RESTRUCTURING SAVINGS ($ millions) Company-wide program, but primarily focused on Brokerage in United Kingdom and United States Total program expected to result in net headcount reduction
Slide 20: Operating Expenses are Being Rationalized
Operating Expenses are Being Rationalized Q4’04 Q1’05 Q3’04 Q3’05 Q2’05 Q1’06 Q4’05 Q2’06 Q3’06 Q4’06 Brokerage and Consulting Expenses Excludes acquisitions, dispositions, foreign currency, settlements and other unusual items 6 of last 10 quarters are negative versus prior year quarter Average over
Slide 21: Margin Improvement Across all Segments
Margin Improvement Across all Segments Consulting* Total Pretax Margin* Risk & Insurance Brokerage* Underwriting* * see Appendix for non-GAAP reconciliation Full Year 2006 140 bps 70 bps 190 bps 100 bps 10.9% 9.0% 2005 2006 16.1% 15.4% 2005 2006 11.0% 12.4% 2005 2006 10.1% 11.1% 2005 2006
Slide 22: Making Progress Towards our 20%+ Target
Making Progress Towards our 20%+ Target + RISK & INSURANCE BROKERAGE (Pretax Margin %)* * see Appendix for non-GAAP reconciliation 440 bps improvement 11.7% 15.4% 20.0% 16.1% 2004 2005 2006 Target
Slide 23: Excess Capital is being Distributed to Shareholders
Major pension plans were under funded by $1.1 billion at 12/31/06 (preliminary) Contributed approximately $350 million of cash and non-cash assets in 2006 Anticipate contributing between $200 million and $300 million of cash in 2007 Annual dividend of $0.60 cents per share, or 1.7% based on 02/08/07
Slide 24: Investments in New Markets, Talent & Technology
$150 million of acquisitions in 2006 New Markets Investments in New Markets, Talent & Technology Fill geographic gaps Product & service expansion Enhanced practice groups Financial Advisory & Litigation (FALC) Facultative Reinsurance Added over 150 colleagues Client facing Core infrastructure Talent
Slide 25: Summary
-- Industry-leading broker of primary risk insurance creating value through integration of global capabilities, margin expansion and effective capital allocation -- Summary Magnitude and complexity of risk is increasing Leveraging our global network of resources and capabilities Improving employee p
Slide 26: Appendix
Appendix
Slide 27: Reconciliation of Revenue & Operating Income Fourth Quarter 2006
Appendix – Page 1 Reconciliation of Revenue & Operating Income Fourth Quarter 2006 (millions) Risk and Insurance Brokerage Services Consulting Insurance Underwriting Unallocated Income & Expense Total Revenue as reported 1,522 $ 364 $ 527 $ - $ 2,413 $ Revenue as adjusted 1,522 $ 364 $ 527 $ - $ 2,4
Slide 28: Reconciliation of Revenue & Operating Income Fourth Quarter 2005
Appendix – Page 2 Reconciliation of Revenue & Operating Income Fourth Quarter 2005 (millions) Risk and Insurance Brokerage Services Consulting Insurance Underwriting Unallocated Income & Expense Total Revenue as reported 1,422 $ 336 $ 483 $ 6 $ 2,247 $ Contingent commissions (4) (3) - - (7) Enduranc
Slide 29: Reconciliation of Revenue & Operating Income Full Year 2006
Appendix – Page 3 Reconciliation of Revenue & Operating Income Full Year 2006 (millions) Risk and Insurance Brokerage Services Consulting Insurance Underwriting Unallocated Income & Expense Total Revenue as reported 5,628 $ 1,282 $ 2,046 $ (2) $ 8,954 $ Gain on sale of Cambridge preferred stock inve
Slide 30: Reconciliation of Revenue & Operating Income Full Year 2005
Appendix – Page 4 Reconciliation of Revenue & Operating Income Full Year 2005 (millions) Risk and Insurance Brokerage Services Consulting Insurance Underwriting Unallocated Income & Expense Total Revenue as reported 5,367 $ 1,255 $ 1,875 $ (1) $ 8,496 $ Contingent commissions (26) (6) - - (32) UK in
Slide 31: Reconciliation of Revenue & Operating Income Full Year 2004
Appendix – Page 5 Reconciliation of Revenue & Operating Income Full Year 2004 Brokerage and Consulting (millions) Risk and Insurance Brokerage Services Consulting Revenue as reported 5,468 $ 1,247 $ Contingent commissions (110) (21) Revenue as adjusted 5,358 $ 1,226 $ Income (loss) from continuing o
Slide 32: Reconciliation of Net Income from Continuing Operations
Appendix – Page 6 Reconciliation of Net Income from Continuing Operations Reconciliation of the Impact of Non-GAAP Measures on Diluted Earnings Per Share Fourth Quarter and Twelve Months Ended December 31, 2006 and 2005 Twelve Months Ended Dec. 31, 2006 Dec. 31, 2005 Diluted earnings per share from