Aon Exec Insights: Revenue Opportunities, Investments in People
Dan Farrell – Sterne, Agee: Can you talk a little bit more about the margin, I think obviously coming in a bit lower than would have thought, and there’s a quite a bit of reinvestment going on in the business, and while it’s a constant practice to reinvest, it seems that it’s running at a higher trend. I guess talk about how much longer you think that goes on, and then maybe expand a bit more on the revenue opportunities and put, maybe some numbers around where you think that starts to ramp, and give you benefits?
Gregory C. Case – President and CEO: I appreciate the question. I think the area of investment is obviously an important one for the quarter and really for the next few quarters. As Christa described, it’s important you really do understand what we are ramping up in 2012, and if you step back and think about what we are accomplishing with our investments, what we’ve done with the Aon Broking investment around GRIP and the overall GRIP platform, we believe it is actually quite unique. I do want to empathize as Christa described, our view is the Risk Solutions margin will be positive in 2012. So, in the end when we think about these investments and the trade-offs, as we look at margin overall, we look at it on a year-to-year basis, and this is going to get reflected in the share. But then step back and think about what we try to accomplish, we want to grow organically, increase margins, increase earnings per share, and we are not just focused on individual quarters, we’re going to focus on the year overall and we are going to take steps to improve the foundation of Aon to the extent we think it can improve operating leverage. These are the kinds of investments we’ve been making. There have been a number that have been on the traditional side that largely the entire industry has been doing around adding talent. We continue to do that too. That’s affected the quarter. Those will pay off over time. But what’s different about this quarter is a specific decision we made for 2012 to ramp up Aon Broking into ramp up of what we are doing with overall growth and this is a very important question. When you think about what we’ve done, we talked about GRIP really for the last couple of years and what we needed to first of all is understand our flow; so $60 billion plus of flow around the world. We needed to do the analytics behind it, growth that by the way. That investment got no monetization. So, we can get a lot of benefit out of that. Then we have to actually introduce that to our clients around the world in our markets to really prove the concept. On this call and some individual conversations we talked about proving concept of GRIP and Aon Broking in 2011. We believe we’ve absolutely done that. We’ve got 25 plus carriers who’ve actually come online and actually are making use of the data. We’ve actually launched a D&O program last summer, (the proves) that we can do on behalf of clients. So, Dan, we’ve made specific steps to truly prove the concept around what we have done with Aon Broking. Now, what we’re doing is we’ve decided we’re going to scale it and scale up means we’re going to make additional investments in technology. By the way, we’re going to add the entire Health and Benefits flow which is another $24 billion of flow; we’re adding geographies; we’re making it more automated and we’re putting people around it. So, we’ve actually got dedicated teams representing the carriers as they come online. So, each of the 25 carriers we’ve got various versions of dedicated teams that help them do what they needed to do to actually better match their capital with our clients. The reason I’m taking a bit of time to make the point is, this is a fundamental difference in the type of investment that I think has been made across the industry. We believe it is very substantial for Aon in that it improves our operating leverage, but it also strengthens our clients serving capability. In many respects, if you think about what we were able to accomplish in 2011, we got quite excited about we were able to hold together and realized that (nor to) actually roll that out, we needed to ramp up and that’s in fact what we’ve done. It’s important again, a lot of times when people actually bring people online or brokers online, they’re talking about a multiyear payback. We know what this payback looks like. We know what the pipeline is. We know the revenue potential. We know the cost of ramp up and support. By the way, we know there’s going to be headwind as we ramp up. But we also know in the context of that there’ll be positive margin for the year. What we’re going to have in the end is we’re going to have positive margin, but we’re also going to have a platform in place that is best-in-class around data and analytics with now over $80 billion of flow. We’ve got revenues from carriers who get great revalue to serve our clients and we’re going to get a higher yield per dollar premium in place. So for us this is an opportunity to ramp up something that we’ve actually been working on for quite some time and you’ll see benefit in year. We could basically absorb the kind of proved phase of this, if you will, for the last couple of years, but we’re not going to able to absorb the ramp-up piece, but we’re quite confident about what the overall benefit is going to look like for us and what it’s going to mean for you. So that’s the difference.
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Dan Farrell – Sterne, Agee: Just one quick follow-up on the Consulting side and the amount of investment going in there. Can you put a number around the revenue opportunity from the healthcare exchanges that you’re making investments because obviously there is probably not much of any revenue yet?
Gregory C. Case – President and CEO: Well, I’d say that – I would contrast by the way just – you’ve asked the question quite appropriately on investments. What we just described on GRIP is different than what we are doing from the healthcare exchange standpoint. That’s actually got a bit more of a lead time. We are putting in place a whole series of things that actually will launch these exchanges both looking at the corporate side and on the retirement side, and so it’s going to take a bit more time, but we see this as a fundamental opportunity. This is again if you think about what’s different around Aon Hewitt from we actually brought the firms together, one of them is a very explicit decision to invest, the better part of $75 million over the course of a couple of years in these exchange arenas, which we think are going to be quite beneficial for our clients and quite beneficial for our shareholders over time, but the lead time is going to be longer.
Christa Davies – EVP and CFO: In terms of the revenue Dan. I mean, we will see revenue in this year on the retire exchange and the corporate exchange will sort of ramp up, but we see the return on this investment being one of the highest across the business, which is why we have made such a large investment.
Investments in People
Ray Iardella – Macquarie: Couple of questions here. First, maybe you can talk about, a little bit about investments in people. I think you guys have called out key investments and talent in the past couple of releases, and certainly with some of the initiatives like GRIP, you certainly need additional talent. I know you pointed to Asia on the brokerage side, but when does that translate, I guess, the talent translate into more revenue growth?
Gregory C. Case – President and CEO: Couple of aspects on that. As you think about, we have been investing in talent and we’ll continue to do so over time particularly as described in Asia and Latin America and the high growth areas around the world, and we see opportunity with the talent investments on this coming end of 2012 into 2013. But I want to contrast that with the people investment we’re making in GRIP, those investments we’re making as we ramp up. We see benefit in 2012, with very clear line of sight and where that’s going to come from. But again I contrast that and the reason I am spending a bit of time on this, it’s important you understand the nature of that investment around building the technology platform, putting it in place, bringing it in front of carrier, potential carriers, having them actually buy into it and come online, gives us very clear confidence and so what it means to ramp that up and get benefit out of that, and we see that from a people investment in ’12, and then the others are the more traditional. So it’s essentially adding 300, 400 or 500 people across Latin America and Asia, because we see big opportunities and that’s going to take a bit more time to play out.
Christa Davies – EVP and CFO: And we certainly see the revenue from these coming in Q4, and we see the investments ramping down in Q3.
Ray Iardella – Macquarie: Then maybe on the HR Solutions side, similar commentary, I mean, is it a back half of 2012?
Christa Davies – EVP and CFO: Yeah. What we would say is, and I did say that we expect that operating income is going to be down modestly year-over-year in Q2 and Q3, and flat in Q4 before growing in 2013, and really the investments we said were going to be $40 million in 2011 and an additional $35 million in 2012, and that $35 million is really front half weighted because we do see revenues coming in the exchange business in Q4, because it ties with the annual enrollment cycle which is at that time period of the year.
Gregory C. Case – President and CEO: It’s almost as if, if you think about literally the series of investments, ARS and Aon Benfield are ahead of where Aon Hewitt is, and Hewitt is come online. We’ve actually now – the clear side on what we want the portfolio to look like, where we see the investment opportunities to be, those play out a bit longer term as Christa just described and the others are going to yield benefits much sooner, because frankly they are in the – we’ve actually had a bit more time now to work with them over the last few years.
Ray Iardella – Macquarie: Then maybe going back to GRIP a little bit. I guess one of the things that I struggle with, I certainly understand the benefits of the GRIP platform, but towards I guess larger insurance carriers, but maybe can you talk about the value proposition that you offer towards smaller insurance carriers, because I think that really makes up the majority I guess of the carriers around the world. Thanks.
Gregory C. Case – President and CEO: Well, this is – again, the opportunity really is, it’s carriers around the world. It really is about how we align their capital and where they want to place it with our flow around the world. So again, obviously nothing is ever guaranteed, but to be able to match their interest with our flow is an incredibly powerful thing. So, if you are a carrier, virtually of any size around the world and you had a view on where you want to invest and how you wanted to invest, what GRIP does is enable you actually to get access, get exposure, get true connection to our flow in a way that you can actually apply your capital and win business and we’ve actually, as we’ve talked about proving the concept, we’ve actually worked with large carriers and medium-sized carriers both. Just for reference, proving the concept 25 carriers is what we talked about. We work with over 2,000 carriers around the globe. So, this is a very large percentage. We absolutely don’t believe that all are going to engage in this nor do we want them to nor do they need to. But we believe the opportunity is substantial really if you’re a large carrier or a medium-sized carrier or a small carrier.