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Outsourcing Town Hall Q2 2012 Outsourcing Town Hall Q4 2012.

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Presentation on theme: "Outsourcing Town Hall Q2 2012 Outsourcing Town Hall Q4 2012."— Presentation transcript:

1 Outsourcing Town Hall Q Outsourcing Town Hall Q4 2012

2 Topics  Financial Results & Business Snapshots  Technology  HR BPO Proprietary & Confidential 1

3 Financials & Business Snapshots

4 Key Metrics*– Aon Delivered Significant Progress in Q4 & 2012 Organic Revenue  Solid growth across both Risk and HR Solutions in Q4, including strong growth in Consulting Services of +8%  Rate of organic revenue for 2012 has improved to +4% from +2% in 2011, 0% in ‘2010 and -1% in 2009 Operating Margin  In Q4, a +50bps increase in HR Solutions was primarily offset by higher unallocated expenses  For 2012, Risk Solutions increased+10bps as organic growth and restructuring savings more than offset significant investments in the business EPS  In Q4, organic revenue, restructuring savings, lower effective tax rate and effective capital management drove 9% growth  Repurchased approximately $500 million of ordinary shares in Q4 and $1.1 billion in 2012 Q Organic Revenue 1 +4% Prior Year +3% +2% 2. Operating Margin % 18.6% Y-o-Y change bps 3. Earnings per Share 2 $1.27 $4.21 Y-o-Y change +9% +4% 4. Free Cash Flow 3 $484M $1.2B Y-o-Y change +243% +48% *The key metrics above are non-GAAP measures that are reconciled in the appendix of this presentation 1Organic revenue excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items. Change in organic revenue, a non-GAAP measure, is reconciled to the corresponding U.S. GAAP percent change in revenue in Appendix A of this presentation 2Certain noteworthy items impacted Operating Income and Earnings per Share in the fourth quarter and full year of 2012 and A Reconciliation of Non- GAAP Measures for Operating income and Diluted Earnings per Share is in Appendix B of this presentation 3Free cash flow is defined as cash flow from operations less capital expenditures. This non-GAAP measure does not imply or represent a precise calculation of residual cash flow available for discretionary expenditures. A reconciliation can be found in Appendix A of this presentation Free Cash Flow  Improved working capital performance (predominantly accounts receivable) more than offset an increase in pension contributions  Record cash flow from operations of $1.4 billion in 2012 Proprietary & Confidential 3

5 Organic Revenue¹ – Solid Growth Across Each Segment Q4  Americas: Solid growth across all regions: Latin America, U.S. retail and Canada  International: Strong growth across Asia and emerging markets and modest growth in continental Europe, partly offset by a modest decline in Australia  Reinsurance: Strong growth in treaty globally driven by a favorable impact from pricing in the near-term and new business, partially offset by a significant decline in capital markets transactions and advisory business Q42012 Risk Solutions Americas 4%3% International 2%3% Retail 3% Reinsurance 2%5% Total Risk Solutions +3%+4% HR Solutions Consulting 8%4% Outsourcing 6%5% Total HR Solutions +6%+4% Total Aon +4% Q4  Consulting: Strong growth in investment consulting, pension administration services and talent and rewards consulting  Outsourcing: Strong growth from HC exchanges, new client wins and demand for discretionary services in HR business process outsourcing, partly offset by a modest decline in benefits administration 1Organic revenue excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items. Change in organic revenue, a non-GAAP measure, is reconciled to the corresponding U.S. GAAP percent change in revenue in Appendix A of this presentation Proprietary & Confidential 4

6 Q Aon Financials Q4 2012Q4 2011Change Vs. Prior Year Quarter Aon Revenue (reported) $3.1 billion$3.0 billion4%, 4% OCC Aon Operating Income (adjusted) $610 million$588 million4% Risk Solutions (Retail and Reinsurance) Revenue (reported) $2.1 billion$2.0 billion2%, 3% OCC Operating Income (adjusted) $475 million$464 million2% Operating Margin (adjusted) 23.2% 0 bps HR Solutions (Aon Hewitt) Revenue (reported) $1.1 billion$1.0 billion7%, 6% OCC Operating Income (adjusted) $183million$165 million11% Operating Margin (adjusted) 17.0%16.5%50 bps Consulting  Net Revenue (reported) $445 million$405 million10%, 8% OCC Outsourcing  Net Revenue (reported) $649 million$603 million8%, 6% OCC 5

7 INSERT BUSINESS FINANCIALS HERE Note to presenters: We can not show specific financial results for Benefits, HR BPO, Exchanges, or Emerging Solutions due to external reporting guidelines. However, leaders in each organization will receive a separate slide for reporting their results. Insert the appropriate slide here based on your audience. 6 Proprietary & Confidential

8 Aon Risk Solutions Full-Year 2012 Snapshot  Top-line growth of 3%, 3% Americas, 3% International  Strong double-digit growth in Asia, New Zealand, Latin America and EMEA AGRC and GRIP Solutions  Solid organic growth in US Affinity, France and emerging markets (Africa, Central and Eastern Europe)  Overall 7% revenue growth in Health & Benefits (4% Americas, 4% International 10% including EMEA 7%, Asia 23%, Pacific 9%)  Strong retention 92% and improved rollover 91% with slightly more favorable market environment  Double digit percentage PTI expansion in US Retail, Canada, Latin America, France, Africa, and Asia driven by growth and positive spread  Progress on key initiatives: Aon Broking, Aon Client Promise, Aon GRIP, Working Capital/Cash and on our Talent agenda  Challenging revenue and PTI in a number of businesses (i.e., Germany, Spain, UK Affinity, Latin America Affinity and Australia)  Overall weak new business in many geographies; overall improved in second half but was flat for the full year  Negative / minimal spread in key geographies constrained PTI and margin expansion  Salary increases (merits and off cycle increases) contributed to a 90 bp deterioration in the SIB-to-revenue ratio (our key metric determining margin) and put significant pressure on margins Proprietary & Confidential 7

9 Aon Benfield Full-Year 2012 Snapshot  Annualized 5% organic revenue growth to USD1.5bn  Healthy 2% Q4 organic revenue growth to USD349m  5 th consecutive quarter-on-quarter revenue growth across Treaty, Fac, Inpoint and capital markets business  7 th consecutive quarter of positive new business won in Treaty  The Aon Benfield platform is unique: scale + analytics = client value  Measurable success from our Articulating Value programme  Record levels of reinsurance capital putting pressure on rates in certain lines of business  Pricing under pressure in some sectors  Potential for adverse development related to Hurricane/Superstorm Sandy  Lower reinsurance demand due to sluggish insurer demand growth in difficult economic environment  Very competitive insurance landscape is also putting pressure on reinsurance demand Proprietary & Confidential 8

10 Aon Hewitt Full-Year 2012 Snapshot  Good PTI performance to plan  Delivered solid growth of 4% -Outsourcing: HR BPO, Emerging Solutions and Exchanges -Consulting: U.S. Retirement, PRT, APAC, NA Communications  Growth rate accelerating in new areas: Investment Consulting, Pension De-Risking, Exchanges, Advisory  Regaining market innovator reputation  Near flawless enrollment season in Exchanges  Improvement in client retention and compression rates  Client satisfaction trending up  Turning the corner on PeopleSoft  Year over Year PTI and margin decline driven by: –Outsourcing compression/losses –PeopleSoft impacts –Slow first half growth in Consulting –Investments  Macroeconomic concerns impacted demand in EMEA and APAC  Colleague engagement lagging other progress Proprietary & Confidential 9

11 We Exceeded Our Plan Commitments on 2012 Pre-Tax Income Much to be proud of this year, but still below our pre-tax income (PTI) results for 2011 $605MM 2011 Actual 2012 Plan 2012 Stretch Target $668MM $636MM 2012 Actual $651MM 10

12 Aon Hewitt’s Newest Line of Business: Health Care Exchanges New medical plan enrollments compared to our target Missed appointments Appointments completed on time Customer satisfaction in interactions with benefits advisors Total plan enrollments for medical, dental, and vision Total AE calls taken across 3 Corporate Exchange clients AE calls answered in 30 seconds or less Portion of enrollments completed online 11 Aon Hewitt Navigators 104.9% % 92% Corporate Exchange 95% 100,000 36,000 94%  Aggressively grow through both business-to-business and direct-to- consumer strategies  Deploy a new platform and website to enhance retiree experience and team productivity  Ramp up for increased enrollment volume for 2013 AE (3x 2012 levels) 2013 Focus AE Results  Convert strong client interest into confirmed wins  Scale our operations to support the high demand for this solution  Differentiate our solution in the market— we offer a real exchange with true competition between carriers

13 Technology

14 Improving the Colleague Experience Through Technology  Aon Technology continuously works to improve colleague productivity—offering enhanced collaboration, conferencing, and communication tools.  Between now and Q2 2014, there are a number of impactful changes planned, including: –Standardizing the Aon colleague desktop with Office 2010, Windows 7, and Aon AppStore. –Increasing access to corporate , calendar, instant messaging, and contacts through various mobile technologies. –Making it easier to share files across the organization. –Expanding voice and video capabilities. –Standardizing North America printer, fax, copier, and scan equipment. –Ensuring the Global Service Desk offers the highest quality standards.  Visit the Colleague Technology Experience site to learn more and share your experiences.Colleague Technology Experience 13

15 BPO HR BPO

16 HR BPO 2012 Snapshot 15 Client relationships very strong Colleagues are the core of our business Need to grow revenue and focus on margin Proprietary & Confidential

17 Our New Themes for Proprietary & Confidential

18 Our Business Plan Balances the Interests of Our Three Primary Stakeholders Achieve the short and long term business plan Realize the return on our strategic and growth investments Fulfill our full promise to clients Deliver industry leading service excellence and operational effectiveness Drive results through increased focus, business acumen and accountability Colleagues Shareholders Clients Foster a culture where colleagues can do their best work and new ideas are nurtured 4 17

19 2013 HR BPO Goals 2 1 Aon Hewitt 2013 GoalsBU Goals Fulfill our full promise to clients  12+ BPO clients sign the Enthusiastic Client Certificate  Retain all clients and core services Deliver industry leading service excellence and operational effectiveness  Meet or exceed SLA performance in >98% of all opportunities on all BPO accounts  Increase off-shoring capability on current and future accounts  Increase standardization and quality of service delivery Drive results through increased focus, business acumen and accountability  Substantially increase SaaS capabilities  Define and implement multi-client operational teams on the Workday platform  Identify and grow next generation of managers Foster a culture where colleagues can do their best work and new ideas are nurtured  Adopt shared services models to gain scale and leverage  Implement cross-BPO specific engagement programs  Increase internal talent movement within BPO Realize the return on our strategic and growth investments  Integrate and grow OmniPoint  Define and implement a valued and scalable Workday BPO offer Achieve the short and long term business plan  Meet or exceed sales targets for BPO  Exceed 2013 PTI margin goals  Meet or exceed all deal models  Positively resolve all accounts with substantial contractual/ financial decisions in Colleagues Clients Shareholders 18


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