Its not easy to talk insurance with
Gregory Case. Although as CEO of London-based Aon he oversees
one of the worlds largest insurance brokerages and
reinsurers, the 50-year-old prefers to discuss risk
and client solutions, reflecting in part the 17
years he spent as an executive at management consulting firm
McKinsey & Co. in Chicago. Since joining Aon in 2005, Case
has quarterbacked the transformation of the insurer into what
he calls a professional services firm, selling off its
underwriting businesses and making two big acquisitions, paying
$1.4 billion for reinsurer Benfield Group in 2008 and
$4.9 billion for human resources specialist Hewitt
Associates two years later.
Under Case, who has an undergraduate degree in finance from
Kansas State University and an MBA from Harvard Business
School, Aon has seen its earnings per share more than
double, from $1.69 in 2006 to $4.21 last year. Shares of the
company have nearly tripled in value during his tenure, rising
from roughly $22 when he started to a recent price of $62.
Institutional Investor Editor Michael Peltz met with
Case at Aons New York offices in March to talk about his
plans for continuing to grow his companys business in an
increasingly complex and risky world, including the decision to
move Aons headquarters last year from Chicago to
Institutional Investor: What
attracted you to Aon?
Case: I had watched the financial services
industry for quite some time from where I was at McKinsey and
had watched Aon because it was a Chicago company. I really saw
an opportunity that I thought was extraordinary. You had a firm
with incredible global infrastructure literally a
physical infrastructure in 120 countries capable of
serving clients. The idea was, lets build the preeminent
professional services firm in the world, focused on risk,
helping clients understand risk, measure risk, mitigate risk
by the way, youll notice I havent said the
word insurance yet and focused on helping
them with their most important people issues around pensions,
retirement, health and benefits.
So you set out to transform Aon into more than an
Right. We had a conversation around the idea that this has
to be about continuing to evolve the firm in a way that we
truly are going to do something that is unique and sustainable
on these two platform areas called risk and people. At the
time, a third of Aon was still an underwriting company. We took
the decision to completely restructure the company. We sold off
all of our underwriting companies, and we focused on risk and
people. And we went from the underwriting business, which was
big-balance-sheet and heavily regulated, to what are now people
businesses that dont have big balance sheets.
How has Aons revenue mix changed?
We sold off roughly $3 billion worth of assets.
Youll see from a revenue standpoint a third of our
revenue was underwriting, a large chunk after that was risk,
and after that was consulting, which was the people part of the
business. When you look at it today, its roughly 60-40:
60 percent risk, 40 percent people. And theres no
How far along was the transformation when the
financial crisis hit?
We had announced at the time the largest acquisition in
Aons history, which was Benfield. That was in August
2008, right before the crisis hit. But we had already sold off
combined insurance, and wed sold off warranties.
Wed actually done some of the selling off to create the
restructuring, and then we brought in Benfield right before the
crisis. So we had to go through the crisis with everybody else,
integrate and bring Benfield into the family and bolster what
was our reinsurance platform.
How important is reinsurance to Aon?
Its very important. The risk solutions segment is
about 60 percent of our business. If you think about what we do
in the risk business, we work with commercial companies
large, middle-size and small. We take all comers. And the
beauty of it is that the companies are in 120 countries and
come in every form and flavor. So its truly a global
focus. And that group of companies oftentimes requires
insurance solutions, and we help coordinate those. Thats
what our retail group does. Its called Aon Risk
And then we also work with the insurers on how they think
about their risk mitigation, and thats what Aon Benfield
does. Thats the reinsurance business. Its the
largest reinsurance risk adviser in the world, and its
probably 50 percent bigger than its next biggest competitor.
Its been a true tour de force in investment for us around
content and analytics.
Can you tell us about the analytics?
We are on an absolute mission to give people data, content
and analytics and help them make better decisions. Aon Benfield
has about 3,000 employees; 500 of those are kind of Ph.D.
statisticians who essentially model global risk on behalf of
insurers. As one of my colleagues, [Aon Benfield co-CEO] Mike
Bungert, would say, if the earth moves or the wind blows on a
global basis, we can tell you the impact by company at a zip
code level. So if Hurricane Sandy is coming to hit the coast of
New York, our guys are modeling, literally block by block, what
the impacts going to be and talking to our clients about
it and talking to the insurers about it.
Whats your take on global warming, and how has
Sandy and the other unusual weather activity of the past few
years impacted your business?
I cant speak to global warming, but what I can tell
you is that the magnitude, complexity and scrutiny of risk are
going up. In our view theres more risk out there facing
clients than ever before. Just think about the impact of
urbanization around the globe. In 20 years two thirds of the
planet is going to be urbanized. Urbanization is going to have
a tremendously powerful influence on the classic risks:
property coverage, casualty all the different
But beyond the basic risks, theres also global warming
sustainability, to your point the impact of
cyberrisk, pandemic, identity theft; literally the level of
risk in the world is going up dramatically. And if that
isnt enough, its also becoming more
Take Thailand. The Thai floods [in 2011] were a tragic
event. But they were also a global supply-chain event. Because
so much was being manufactured there, the floods were impacting
our client P&Ls all around the world. Now everybody cares
about this stuff. CEOs, boards of directors, CFOs all care
about this. If we can help a client strengthen its operating
performance, improve its balance sheet or reduce volatility
through taking actions around risk, risk assessment, risk
understanding, thats powerful. Again, I havent said
the word insurance yet.
Where does insurance fit into this?
Insurance is one solution. So what that means literally is,
if you think about helping a client understand, measure and
mitigate risk, there are specific periods of time in
fact, a lot of what we do is, we say to a client, Listen,
we can actually use somebody elses balance sheet to help
you take the volatility away from your earnings, and
thats called insurance. And were very fortunate; we
place more premium than anyone in the world. On the retail side
its about $80 billion; its about
$25 billion or $30 billion on the reinsurance side.
We place over $100 billion of premium per year, and
were about 23 percent of all of Lloyds of London.
Were the largest provider into Lloyds.
Was that part of the reason you moved Aons
headquarters to London?
As we thought about leading a global firm and where we
wanted to do it and the places we wanted to look at, London was
a very logical place. It does create more connectivity to our
global opportunities around the world, in Asia and Europe, in
some respects even in Latin America. Lloyds is obviously
a very big part of the London marketplace, and as I said
before, we are the single largest provider into Lloyds.
For us the opportunity to be in London sent a message of being
more global and was powerful from a strategic standpoint. The
other aspect is capital management. Operating as a London PLC
gives us the ability to manage our capital in a much more fluid
way around the world.
Just by having one global pool of capital. You can actually
move it between countries and you dont have penalties or
taxes and things like that. So, ironically, we can invest more
back into the U.S. and have invested more back into the
U.S. since our move to London.
Lets discuss the people side of the
At the time we bought Benfield, we had a consulting business
that was successful, but it wasnt as strong as it could
be. We took the decision that we really wanted to have a global
platform that was compelling and we could truly do things on
behalf of clients both from an advice standpoint and an
execution standpoint. Hewitt was the perfect fit for that. In
2010 we made the same kind of investment in Aon Hewitt that we
had made with the risk part of the business.
Are there similarities between the two
I often get asked, How do risk and people fit
together? I would ask you, just pick a major company in
the U.S. that has a huge underfunded pension. Is that a people
issue, or is that a risk issue? And the answer is, yes,
its an HR problem, and its a CFO problem.
The second major area is health care. If you think about the
one area on a clients P&L in the U.S. that went up 10
to 15 percent every year during the recession, its that
little line item called health and benefits. This is an area of
the P&L thats going to continue to get worse, in
fact. And if there are ways we can actually help flatten the
curve of increase, it would be hugely powerful.
How are you trying to do that?
One is something we call health care exchanges. We launched
the first corporate health care exchange last year. What
youre really doing is giving your employees a fixed
amount and saying to them, Weve created a platform
for you to secure your health care coverage with a
lot of structure, by the way. Its a lot of information, a
lot of comparative approaches, so they literally can go on the
exchange and buy their health care coverage.
What are the benefits?
What that does for a CFO is, you now actually know the
amount of increase youre going to have every year. So
youve literally controlled your volatility in terms of
what youre doing. Thats incredibly powerful. The
great thing is, when weve actually started to do this,
employees are making choices that better fit with their
lifestyles. This is actually a really important thing, and a
lot of times younger families buy too much health care
coverage, and a lot of times older families buy too little
health care coverage. When you think about making that choice,
if youre a younger family and youre buying the
right health care coverage and youre investing the
difference in your retirement, youre actually addressing
two issues. That can be powerful over time.