- Total Revenue was $1.8 billion and EPS from Continuing Operations
was $0.40 Third Quarter Summary - EPS from continuing operations,
excluding certain items, decreased 6% to $0.65 - Brokerage revenue
was $1.5 billion with a decline in organic revenue of 3% -
Brokerage pretax margin was 12.6% and the adjusted pretax margin,
excluding certain items, increased 140 basis points to 18.4% -
Consulting revenue was $308 million with a decline in organic
revenue of 5% - Consulting pretax margin was 10.7% and the adjusted
pretax margin, excluding certain items, decreased 10 basis points
to 15.6% - Repurchased 3.0 million shares of common stock for $125
million - Increased estimated annualized savings related to the
2007 restructuring program by $97 million to $467 million, and
costs necessary to achieve savings by $150 million to $700 million
- Accelerated estimated savings targets for 2009 and 2010 under the
Aon Benfield restructuring program, while decreasing total costs
necessary to achieve savings by $30 million to $155 million
CHICAGO, Oct. 30 /PRNewswire-FirstCall/ -- Aon Corporation
(NYSE:AOC) today reported results for the third quarter ended
September 30, 2009. Net income attributable to Aon stockholders was
$120 million or $0.41 per share, compared to $117 million or $0.40
per share for the prior year quarter. Net income attributable to
Aon stockholders from continuing operations decreased 25% to $117
million or $0.40 per share, compared to $155 million or $0.53 per
share for the prior year quarter. Net income attributable to Aon
stockholders from continuing operations per share, excluding
certain items, decreased 6% to $0.65 compared to $0.69 for the
prior year quarter, including a $62 million or 69% decline in
investment income. Certain items that impacted third quarter
results and comparisons with the prior year quarter are detailed in
the reconciliation of non-GAAP measures on page 12 of this press
release. "Our third quarter results reflect solid operational
discipline, as highlighted by a 140 basis point adjusted pretax
margin improvement in our Brokerage segment, despite difficult
economic and industry conditions and a 69 percent decline in total
investment income," said Greg Case, president and chief executive
officer. "We continue to make substantial investments across our
businesses with the rollout of our Global Risk Insight Platform and
the introduction of Inpoint, our insurance carrier consulting
business, as well as the addition of key talent in Consulting. As
we invest in future growth opportunities, our 2007 and Aon Benfield
restructuring programs will continue to deliver additional cost
savings as we have achieved less than 40 percent thus far, of the
total $589 million of estimated annual savings under these two
programs. Lastly, our balance sheet and strong cash flow provide
significant financial flexibility to create shareholder value, as
highlighted by the repurchase of an additional $125 million of
stock during the quarter." THIRD QUARTER FINANCIAL SUMMARY Total
revenue decreased 2% to $1.8 billion due to a 5% decline resulting
from foreign currency translation and a 69% decline in investment
income, partially offset by a 9% increase from acquisitions,
primarily Benfield, net of dispositions. Total operating expenses
were similar to the prior year quarter at $1.6 billion, including
an $82 million favorable impact from foreign currency translation,
partially offset by a $45 million increase in restructuring charges
and operating expenses from the Benfield merger. Restructuring
expenses related to the 2007 and Aon Benfield restructuring
programs were $99 million in the third quarter compared to $54
million in the prior year quarter. An analysis of
restructuring-related expenses by segment and type for both the
2007 and Aon Benfield restructuring programs are detailed on page
13 of this release. Restructuring savings in the third quarter
related to the 2007 restructuring program are estimated at $68
million compared to $29 million in the prior year quarter. Of the
estimated restructuring savings in the third quarter, $57 million
were related to the Brokerage segment primarily for workforce
reduction. Before any potential reinvestment of savings, the 2007
restructuring program is now expected to deliver cumulative cost
savings of approximately $240-245 million in 2009 and $467 million
of annualized run-rate cost savings by the end of 2010, primarily
as a result of additional cost savings opportunities to streamline
support functions globally. Restructuring savings in the third
quarter related to the Aon Benfield restructuring program are
estimated at $14 million. Before any potential reinvestment of
savings, the Benfield restructuring program is now expected to
deliver cumulative cost savings of $45-50 million in 2009, $90-100
million in 2010 and $122 million in 2011. Currency fluctuations in
the third quarter negatively impacted income from continuing
operations by $0.01 per diluted share when the Company translates
prior year quarter results at current quarter foreign exchange
rates. Effective tax rate on continuing operations was 26.7% for
the third quarter compared to 27.1% for the prior year quarter. The
rate in the third quarter includes an underlying tax rate on
operations of 28.0%. Average diluted shares outstanding decreased
to 292.1 million in the third quarter compared to 293.9 million in
the prior year quarter. As a result of accounting guidance
introduced in the first quarter, share-based payment awards which
receive non-forfeitable dividends are now included in the
calculation of basic and diluted shares outstanding. Average
diluted shares outstanding increased by approximately 3.4 million
in the third quarter and 3.6 million in the prior year quarter as a
result of these share-based awards being included in the
calculation of diluted earnings per share. During the quarter, the
Company repurchased 3.0 million shares of common stock for $125
million. As of September 30, the Company had approximately $605
million of remaining share repurchase authorization. Discontinued
Operations after-tax income was $3 million or $0.01 per share
compared to an after-tax loss of $38 million or $0.13 per share for
the prior year quarter. Discontinued operations include adjustments
to the gains and losses of previously sold companies. The prior
year quarter includes the results of Automobile Insurance
Specialists (AIS) and post-close adjustments related to the sale of
Combined Insurance Companies of America (CICA) and Sterling Life
Insurance (Sterling). THIRD QUARTER SEGMENT REVIEW Certain
noteworthy items impacted pretax income and pretax margins in the
third quarter of 2009 and 2008. The third quarter segment reviews
provided below include supplemental information related to adjusted
pretax income and pretax margin which is described in detail on the
"Reconciliation of the Impact of Non-GAAP Measures on Segments and
Diluted Earnings Per Share" on page 12 of this press release. RISK
AND INSURANCE BROKERAGE SERVICES
------------------------------------- Third Quarter Ended Less:
(millions) ------------------- Less: Acquisitions, Organic
Commissions, Sep 30, Sep 30, % Currency Divestitures, Revenue Fees
and Other 2009 2008 Change Impact Other Growth -------------- ----
---- ------ ------ ----- ------ Americas $541 $557 (3)% (2)% -%
(1)% U.K. 167 182 (8) (9) 5 (4) EMEA 273 314 (13) (7) (1) (5) Asia
Pacific 111 120 (8) (5) (2) (1) Reinsurance 379 252 50 (4) 58 (4)
--- --- --- --- --- --- Subtotal $1,471 $1,425 3% (5)% 11% (3)%
------ ------ --- --- --- --- Investment Income 18 48 (63)% --- ---
--- Total Revenue $1,489 $1,473 1% ====== ====== === Risk and
Insurance Brokerage Services total revenue increased 1% to $1.5
billion compared to the prior year quarter due to an 11% increase
from acquisitions, primarily Benfield, net of dispositions,
partially offset by a 5% unfavorable impact from foreign currency
translation on commissions and fees and a 63% decline in investment
income. Americas organic revenue decreased 1% due primarily to weak
economic conditions and a soft market in both U.S. Retail and
Canada, partially offset by strong growth in Latin America. U.K.
organic revenue decreased 4% due primarily to weak economic
conditions and lower new business. EMEA organic revenue decreased
5% as weak economic conditions in continental Europe offset growth
in certain emerging markets. Asia Pacific organic revenue decreased
1% reflecting the impact of exiting certain businesses in Japan,
partially offset by modest growth in New Zealand and certain
emerging markets. Reinsurance organic revenue decreased 4% due
primarily to higher cedent retentions in treaty business, partially
offset by new business growth globally in treaty placements. Third
Quarter Ended ------------------- (millions) Sept 30, Sept 30, %
2009 2008 Change ------ ------ ------ Revenue $1,489 $1,473 1%
Expenses Compensation and benefits 909 910 - Other expenses 393 380
3 ----- --- --- Total operating expenses 1,302 1,290 1 ----- -----
--- $187 $183 2% Operating income Other (income) expense (1) (9)
(89) ---- ---- --- Pretax income $188 $192 (2)% ==== ==== ===
Pretax margin 12.6% 13.0% Pretax income - adjusted $274 $251 9%
Pretax margin - adjusted 18.4% 17.0% Compensation and benefits for
the third quarter was similar to the prior year quarter including a
$48 million favorable impact from foreign currency translation,
benefits related to the restructuring programs and lower
discretionary incentive compensation, primarily offset by increased
operating expenses from the Benfield merger and a $7 million
increase in restructuring related costs. Other expenses for the
third quarter increased $13 million from the prior year quarter due
primarily to a $24 million increase in restructuring related costs,
the inclusion of Benfield operating expenses and an $11 million
increase in intangible amortization expense related to the merger
with Benfield, partially offset by a $18 million favorable impact
from foreign currency translation. Third quarter pretax income
decreased 2% to $188 million. Adjusting for certain items detailed
on page 12 of this press release, pretax income increased 9% or $23
million to $274 million and pretax margin increased 140 basis
points to 18.4% versus the prior year quarter due primarily to
benefits of the restructuring programs, lower discretionary
incentive compensation and the inclusion of pretax income from the
merger with Benfield, partially offset by a $30 million decrease in
investment income and higher intangible amortization expenses.
CONSULTING ---------- Third Quarter Ended Less: (millions)
------------------- Less: Acquisitions, Organic Commissions, Sept
30, Sept 30, % Currency Divestitures, Revenue Fees and Other 2009
2008 Change Impact Other Growth -------------- ---- ---- ------
------ ----- ------ Services $262 $284 (8)% (4)% 1% (5)%
Outsourcing 46 51 (10) (6) 1 (5) --- --- --- --- --- --- Subtotal
$308 $335 (8)% (4)% 1% (5)% ---- ---- --- --- --- --- Investment
Income - 2 (100)% --- --- --- Total Revenue $308 $337 (9)% ====
==== === Consulting total revenue decreased 9% to $308 million
compared to the prior year quarter due primarily to a 5% decline in
organic commissions and fees revenue and a 4% unfavorable impact
from foreign currency translation. Organic revenue in Consulting
Services decreased 5% primarily reflecting a decline in
compensation and human capital consulting. Organic revenue in
Outsourcing declined 5% as a previously announced outsourcing
contract winds down. Third Quarter Ended -------------------
(millions) Sept 30, Sept 30, % 2009 2008 Change ---- ---- ------
Revenue $308 $337 (9)% Expenses Compensation and benefits 198 206
(4) Other expenses 77 79 (3) --- --- --- Total operating expenses
275 285 (4) --- --- --- Operating income $33 $52 (37)% Other
(income) expense - - N/A --- --- --- Pretax income $33 $52 (37)%
=== === === Pretax margin 10.7% 15.4% Pretax income - adjusted $48
$53 (9)% Pretax margin - adjusted 15.6% 15.7% Compensation and
benefits for the third quarter decreased 4% or $8 million from the
prior year quarter including a $9 million favorable impact from
foreign currency translation, benefits related to the 2007
restructuring program and lower discretionary incentive
compensation, partially offset by a $7 million increase in
restructuring related costs. Other expenses decreased 3% or $2
million compared to the prior year quarter due to a $3 million
favorable impact from foreign currency translation. Third quarter
pretax income decreased 37% to $33 million. Adjusting for certain
items detailed on page 12 of this press release, pretax income
decreased 9% or $5 million to $48 million and pretax margin
decreased 10 basis points to 15.6% versus the prior year quarter as
lower organic revenue was partially offset by benefits related to
the 2007 restructuring program and lower discretionary incentive
compensation. UNALLOCATED INCOME AND EXPENSE
------------------------------ Third Quarter Ended
------------------- (millions) Sept 30, Sept 30, % 2009 2008 Change
---- ---- ------ Operating segment income before tax $221 $244 (9)%
Unallocated investment income & other revenue 19 40 (53)
Unallocated expenses (30) (34) (12) Interest expense (32) (32) -
--- --- --- Income from continuing operations before tax $178 $218
(18)% ==== ==== ==== Unallocated investment income and other
revenue for the third quarter decreased $21 million to $19 million
compared to the prior year quarter due primarily to a $27 million
decline in certain private equity distributions, partially offset
by $10 million of revenue related to the Company's equity ownership
in certain insurance investment funds. Unallocated expenses
decreased $4 million to $30 million. The third quarter included $3
million of expense related to the Company's equity ownership in
certain insurance investment funds. The prior year quarter included
$6 million of costs related to the Benfield merger. Interest
expense was similar to the prior year quarter at $32 million.
Conference Call and Webcast Details The Company will host a
conference call on Friday, October 30, 2009 at 7:30 a.m. central
time. Interested parties can listen to the conference call via a
live audio webcast at http://www.aon.com/. About Aon Aon
Corporation (NYSE:AOC) is the leading global provider of risk
management services, insurance and reinsurance brokerage, and human
capital consulting. Through its more than 37,000 colleagues
worldwide, Aon readily delivers distinctive client value via
innovative and effective risk management and workforce productivity
solutions. Aon's industry-leading global resources and technical
expertise are delivered locally through more than 500 offices in
more than 120 countries. Named the world's best broker by Euromoney
magazine's 2008 and 2009 Insurance Survey, Aon also ranked highest
on Business Insurance's listing of the world's largest insurance
brokers based on commercial retail, wholesale, reinsurance and
personal lines brokerage revenues in 2008 and 2009. A.M. Best
deemed Aon the number one insurance broker based on brokerage
revenues in 2007, 2008, and 2009, and Aon was voted best insurance
intermediary, best reinsurance intermediary and best employee
benefits consulting firm in 2007 and 2008 by the readers of
Business Insurance. For more information on Aon, log onto
http://www.aon.com/. Safe Harbor Statement This press release
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
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from either historical or anticipated results depending on a
variety of factors. Potential factors that could impact results
include: general economic conditions in different countries in
which we do business around the world, changes in global equity and
fixed income markets that could affect the return on invested
assets, fluctuations in exchange and interest rates that could
influence revenue and expense, rating agency actions that could
affect our ability to borrow funds, funding of our various pension
plans, changes in the competitive environment, our ability to
implement restructuring initiatives and other initiatives intended
to yield cost savings, changes in commercial property and casualty
markets and commercial premium rates that could impact revenues,
the outcome of inquiries from regulators and investigations related
to compliance with the U.S. Foreign Corrupt Practices Act and
non-U.S. anti-corruption laws, the impact of investigations brought
by U.S. state attorneys general, U.S. state insurance regulators,
U.S. federal prosecutors, U.S. federal regulators, and regulatory
authorities in the U.K. and other countries, the impact of class
actions and individual lawsuits including client class actions,
securities class actions, derivative actions, ERISA class actions,
the cost of resolution of other contingent liabilities and loss
contingencies, our ability to integrate Benfield successfully and
to realize the anticipated benefits of the Benfield merger. Further
information concerning the Company and its business, including
factors that potentially could materially affect the Company's
financial results, is contained in the Company's filings with the
Securities and Exchange Commission. This press release includes
supplemental information related to organic revenue growth and
several additional measures including expenses, margins and income
per share, that exclude the effects of restructuring charges and
certain other noteworthy items that affected results for the
comparable periods. Organic revenue growth excludes from reported
revenues the impact of foreign exchange, acquisitions,
divestitures, transfers between business units, investment income,
reimbursable expenses and unusual items. The impact of foreign
exchange is determined by translating last year's revenue, expense
or net income at this year's foreign exchange rates. Reconciliation
is provided in the attached schedules. Supplemental organic revenue
growth information and additional measures that exclude the effects
of the restructuring charges and certain other items do not affect
net income or any other GAAP reported amounts. Management believes
that these measures are important to make meaningful
period-to-period comparisons and that this supplemental information
is helpful to investors. They should be viewed in addition to, not
in lieu of, the Company's Consolidated Summary of Operations.
Industry peers provide similar supplemental information regarding
their performance, although they may not make identical
adjustments. Investor Contact: Media Contact: Scott Malchow David
Prosperi Vice President, Vice President, Investor Relations Global
Public Relations 312-381-3983 312-381-2485 Aon Corporation
Consolidated Summary of Operations (Unaudited) Third Quarter Ended
Nine Months Ended ------------------- ----------------- Sept. Sept.
Sept. Sept. (millions except 30, 30, Percent 30, 30, Percent per
share data) 2009 2008 Change 2009 2008 Change ---- ---- ------ ----
---- ------ Revenue ------- Commissions, fees and other $1,780
$1,756 1% $5,466 $5,493 -% Investment income 28 90 (69) 81 214 (62)
--- --- --- --- --- --- Total revenue 1,808 1,846 (2) 5,547 5,707
(3) ----- ----- --- ----- ----- --- Expenses -------- Compensation
and benefits 1,119 1,131 (1) 3,267 3,428 (5) Other general expenses
424 419 1 1,287 1,333 (3) Depreciation and amortization 56 49 14
174 157 11 --- --- --- --- --- --- Total operating expenses 1,599
1,599 - 4,728 4,918 (4) ----- ----- --- ----- ----- --- Operating
income 209 247 (15) 819 789 4 Interest expense 32 32 - 87 96 (9)
Other (income) expense (1) (3) (67) 1 (9) N/A --- --- --- --- ---
--- Income from continuing operations before provision for income
tax 178 218 (18) 731 702 4 Provision for income tax (1) 47 59 (20)
212 192 10 --- --- --- --- --- --- Income from continuing
operations 131 159 (18) 519 510 2 --- --- --- --- --- ---
Discontinued operations Income (loss) from discontinued operations
- (57) N/A 93 1,440 (94) Provision for (benefit from) income tax
(2) (3) (19) (84) 38 470 (92) --- --- --- --- --- --- Income (loss)
from discontinued operations 3 (38) N/A 55 970 (94) --- --- ----
--- --- --- Net income 134 121 11 574 1,480 (61) Less: Net income
attributable to the noncontrolling interests 14 4 250 25 12 108 ---
--- --- --- --- --- Net income attributable to Aon stockholders
$120 $117 3% $549 $1,468 (63)% ==== ==== === ==== ====== === Net
income attributable to Aon stockholders: Income from continuing
operations $117 $155 (25)% $494 $498 (1)% Income (loss) from
discontinued operations 3 (38) N/A 55 970 (94) --- --- --- --- ---
--- Net income $120 $117 3% $549 $1,468 (63)% ==== ==== === ====
====== === Basic net income per share attributable to Aon
stockholders (3): Income from continuing operations $0.41 $0.55
(25)% $1.74 $1.68 4% Income (loss) from discontinued operations
0.01 (0.13) N/A 0.19 3.26 (94) ---- ----- --- ---- ---- --- Net
income $0.42 $0.42 -% $1.93 $4.94 (61)% ===== ===== === ===== =====
=== Diluted net income per share attributable to Aon stockholders
(3): Income from continuing operations $0.40 $0.53 (25)% $1.69
$1.61 5% Income (loss) from discontinued operations 0.01 (0.13) N/A
0.19 3.14 (94) ---- ----- --- ---- ---- --- Net income $0.41 $0.40
3% $1.88 $4.75 (60)% ===== ===== === ===== ===== === Weighted
average common shares outstanding - diluted 292.1 293.9 (1)% 292.2
308.9 (5)% ===== ===== === ===== ===== === (1) Tax rate for
continuing operations is 26.7% and 27.1% for the third quarters
ended September 30, 2009 and 2008, respectively, and 29.1% and
27.4% for the nine months ended September 30, 2009 and 2008,
respectively. The underlying tax rate on continuing operations for
2009 is approximately 28%. (2) Tax rate for discontinued operations
is not meaningful and 33.3% for the third quarters ended September
30, 2009 and 2008, respectively, and 40.9% and 32.6% for the nine
months ended September 30, 2009 and 2008, respectively. (3) The
basic and diluted earnings per share calculation was performed
using the two-class method and included the impact of certain
unvested share-based payment awards that have the right to receive
nonforfeitable dividends. Aon Corporation Revenue from Continuing
Operations (Unaudited) Third Quarter Ended
------------------------------------------------------- Less:
Acqui- Less: sitions, Organic Sept. Sept. Currency Divest- Revenue
30, 30, Percent Impact itures Growth (millions) 2009 2008 Change
(1) & Other (2) ---- ---- ------ ------- -------- -------
Commissions, Fees and Other --------------- Risk and Insurance
Brokerage Services: Americas $541 $557 (3)% (2)% -% (1)% United
Kingdom 167 182 (8) (9) 5 (4) Europe, Middle East & Africa 273
314 (13) (7) (1) (5) Asia Pacific 111 120 (8) (5) (2) (1)
Reinsurance brokerage and related services 379 252 50 (4) 58 (4)
--- --- --- --- --- --- Total Risk and Insurance Brokerage Services
1,471 1,425 3 (5) 11 (3) ----- ----- --- --- --- --- Consulting:
Consulting services 262 284 (8) (4) 1 (5) Outsourcing 46 51 (10)
(6) 1 (5) --- --- --- --- --- --- Total Consulting 308 335 (8) (4)
1 (5) --- --- --- --- --- --- Total Operating Segments $1,779
$1,760 1% (5)% 9% (3)% ====== ====== === === === === Investment
Income ----------------- Risk and Insurance Brokerage Services $18
$48 (63)% Consulting - 2 (100) Unallocated 10 40 (75) -- -- ---
Total $28 $90 (69)% === === === Total Revenue ------------- Risk
and Insurance Brokerage Services $1,489 $1,473 1% Consulting 308
337 (9) Unallocated and Other 19 40 (53) Intersegment (8) (4) 100
--- --- --- Total $1,808 $1,846 (2)% ====== ====== === (1) Currency
impact is determined by translating last year's revenue at this
year's foreign exchange rates. (2) Organic revenue growth excludes
the impact of foreign exchange, acquisitions, divestitures,
transfers, reimbursable expenses and unusual items. Aon Corporation
Revenue from Continuing Operations (Unaudited) Nine Months Ended
------------------------------------------------------ Less: Acqui-
Less: sitions, Organic Sept. Sept. Currency Divest- Revenue 30, 30,
Percent Impact itures Growth (millions) 2009 2008 Change (1) &
Other (2) ---- ---- ------ ------- -------- -------- Commissions,
Fees and Other -------------- Risk and Insurance Brokerage
Services: Americas $1,592 $1,638 (3)% (4)% -% 1% United Kingdom 464
546 (15) (14) 4 (5) Europe, Middle East & Africa 1,030 1,188
(13) (11) - (2) Asia Pacific 318 373 (15) (12) (2) (1) Reinsurance
brokerage and related services 1,146 756 52 (6) 58 - ----- --- ---
--- --- --- Total Risk and Insurance Brokerage Services 4,550 4,501
1 (8) 10 (1) ----- ----- --- --- --- --- Consulting: Consulting
services 776 850 (9) (8) - (1) Outsourcing 140 162 (14) (10) - (4)
--- --- --- --- --- --- Total Consulting 916 1,012 (9) (8) 1 (2)
--- ----- --- --- --- --- Total Operating Segments $5,466 $5,513
(1)% (8)% 8% (1)% ====== ====== === === === === Investment Income
----------------- Risk and Insurance Brokerage Services $67 $148
(55)% Consulting 1 4 (75) Unallocated 13 62 (79) --- --- --- Total
$81 $214 (62)% === ==== === Total Revenue ------------- Risk and
Insurance Brokerage Services $4,617 $4,649 (1)% Consulting 917
1,016 (10) Unallocated and Other 33 62 (47) Intersegment (20) (20)
- --- --- --- Total $5,547 $5,707 (3)% ====== ====== === (1)
Currency impact is determined by translating last year's revenue at
this year's foreign exchange rates. (2) Organic revenue growth
excludes the impact of foreign exchange, acquisitions,
divestitures, transfers, reimbursable expenses and unusual items.
Aon Corporation - Segments (Unaudited) Risk and Insurance Brokerage
Services - Continuing Operations
--------------------------------------------------------------
Third Quarter Ended Nine Months Ended -------------------------
---------------------- Sept. Sept. Sept. Sept. 30, 30, Percent 30,
30, Percent (millions) 2009 2008 Change 2009 2008 Change ---- ----
------ ---- ---- ------ Revenue ------- Commissions, fees and other
$1,471 $1,425 3% $4,550 $4,501 1% Investment income 18 48 (63) 67
148 (55) --- --- --- --- --- --- Total revenue 1,489 1,473 1 4,617
4,649 (1) ----- ----- --- ----- ----- --- Expenses --------
Compensation and benefits 909 910 - 2,678 2,773 (3) Other general
expenses 393 380 3 1,207 1,221 (1) --- --- --- ----- ----- ---
Total operating expenses 1,302 1,290 1 3,885 3,994 (3) ----- -----
--- ----- ----- --- Operating income 187 183 2 732 655 12 Other
expense (income) (1) (9) (89) 6 (14) N/A -- -- --- --- --- ---
Income before provision for income tax $188 $192 (2)% $726 $669 9%
==== ==== === ==== ==== === Pretax income margin 12.6% 13.0% 15.7%
14.4% Consulting - Continuing Operations Third Quarter Ended Nine
Months Ended ------------- ------------------------
---------------------- Sept. Sept. Sept. Sept. 30, 30, Percent 30,
30, Percent (millions) 2009 2008 Change 2009 2008 Change ---- ----
------ ---- ---- ------ Revenue ------- Commissions, fees and other
$308 $335 (8)% $916 $1,012 (9)% Investment income - 2 (100) 1 4
(75) --- --- ---- --- --- --- Total revenue 308 337 (9) 917 1,016
(10) --- --- --- --- ----- --- Expenses -------- Compensation and
benefits 198 206 (4) 544 612 (11) Other general expenses 77 79 (3)
229 247 (7) --- --- --- --- --- --- Total operating expenses 275
285 (4) 773 859 (10) --- --- --- --- --- --- Operating income 33 52
(37) 144 157 (8) Other expense (income) - - - - (1) (100) --- ---
--- --- --- ---- Income before provision for income tax $33 $52
(37)% $144 $158 (9)% === === === ==== ==== === Pretax income margin
10.7% 15.4% 15.7% 15.6% Reconciliation of segment income before
provision for income tax to income from continuing operations
before provision for income tax: Third Quarter Ended Nine Months
Ended ------------------------- ----------------------- Sept. Sept.
Sept. Sept. 30, 30, Percent 30, 30, Percent (millions) 2009 2008
Change 2009 2008 Change ---- ---- ------ ---- ---- ------- Segment
income before provision for income tax Risk and Insurance Brokerage
Services $188 $192 (2)% $726 $669 9% Consulting 33 52 (37) 144 158
(9) --- --- --- --- --- --- Total segment income before provision
for income tax 221 244 (9) 870 827 5 Unallocated investment income
and other revenue 19 40 (53) 33 62 (47) Unallocated expenses (30)
(34) (12) (85) (91) (7) Interest expense (32) (32) - (87) (96) (9)
--- --- --- --- --- --- Income from continuing operations before
provision for income tax $178 $218 (18)% $731 $702 4% ==== ==== ===
==== ==== === Pretax income margin 9.8% 11.8% 13.2% 12.3% Aon
Corporation Reconciliation of the Impact of Non-GAAP Measures on
Segments and Diluted Earnings Per Share (Unaudited) (1) Third
Quarter Ended September 30, 2009
-------------------------------------- Risk and Insurance
Unallocated (millions except Brokerage Income & per share data)
Services Consulting Expense Total -------- ---------- -----------
----- Revenue as reported $1,489 $308 $11 $1,808 ====== ==== ===
====== Income (loss) from continuing operations before provision
for income tax - as reported $188 $33 $(43) $178 Restructuring
charges (Aon Benfield and 2007 plan) 84 15 - 99 Pension curtailment
- - - - Anti-bribery and compliance initiatives 1 - - 1 Benfield
integration costs 1 - - 1 --- --- --- --- Income (loss) from
continuing operations before provision for income tax - as adjusted
$274 $48 $(43) 279 ==== === ==== Provision for income taxes (2) 75
--- Income from continuing operations - as adjusted 204 Less: Net
income attributable to noncontrolling interests 14 --- Income from
continuing operations - as adjusted $190 ==== Diluted earnings per
share from continuing operations - as adjusted $0.65 ===== Weighted
average common shares outstanding - diluted 292.1 ===== Pretax
income margins - as adjusted 18.4% 15.6% N/A 15.4% ==== ==== ===
==== Third Quarter Ended September 30, 2008
--------------------------------------------- Risk and Insurance
Unallocated (millions except Brokerage Income & per share data)
Services Consulting Expense Total -------- ---------- -----------
----- Revenue as reported $1,473 $337 $36 $1,846 ====== ==== ===
====== Income (loss) from continuing operations before provision
for income tax - as reported $192 $52 $(26) $218 Restructuring
charges (2005 and 2007 plan) 53 1 - 54 Anti-bribery and compliance
initiatives 6 - - 6 Benfield costs - - 6 6 Gain on sale of land - -
- - --- --- --- --- Income (loss) from continuing operations before
provision for income tax - as adjusted $251 $53 $(20) 284 ==== ===
==== Provision for income taxes (2) 77 --- Income from continuing
operations - as adjusted 207 Less: Net income attributable to
noncontrolling interests 4 --- Income from continuing operations -
as adjusted $203 ==== Diluted earnings per share from continuing
operations - as adjusted $0.69 ===== Weighted average common shares
outstanding - diluted 293.9 ===== Pretax income margins - as
adjusted 17.0% 15.7% N/A 15.4% ==== ==== === ==== Nine Months Ended
September 30, 2009 ------------------------------------------- Risk
and Insurance Unallocated (millions except Brokerage Income &
per share data) Services Consulting Expense Total --------
---------- ----------- ----- Revenue as reported $4,617 $917 $13
$5,547 ====== ==== === ====== Income (loss) from continuing
operations before provision for income tax - as reported $726 $144
$(139) $731 Restructuring charges (Aon Benfield and 2007 plan) 216
21 - 237 Pension curtailment (54) (20) (4) (78) Anti-bribery and
compliance initiatives 3 - - 3 Benfield integration costs 13 - - 13
--- --- --- --- Income (loss) from continuing operations before
provision for income tax - as adjusted $904 $145 $(143) 906 ====
==== ===== Provision for income taxes (2) 251 --- Income from
continuing operations - as adjusted 655 Less: Net income
attributable to noncontrolling interests 25 --- Income from
continuing operations - as adjusted $630 ==== Diluted earnings per
share from continuing operations - as adjusted $2.16 ===== Weighted
average common shares outstanding - diluted 292.2 ===== Pretax
income margins - as adjusted 19.6% 15.8% N/A 16.3% ==== ==== ===
==== Nine Months Ended September 30, 2008
------------------------------------ Risk and Insurance Unallocated
(millions except Brokerage Income & per share data) Services
Consulting Expense Total -------- ---------- ----------- -----
Revenue as reported $4,649 $1,016 $42 $5,707 ====== ====== ===
====== Income (loss) from continuing operations before provision
for income tax - as reported $669 $158 $(125) $702 Restructuring
charges (2005 and 2007 plan) 159 8 - 167 Anti-bribery and
compliance initiatives 31 - - 31 Benfield costs - - 6 6 Gain on
sale of land (5) - - (5) --- --- --- --- Income (loss) from
continuing operations before provision for income tax - as adjusted
$854 $166 $(119) 901 ==== ==== ===== Provision for income taxes (2)
247 --- Income from continuing operations - as adjusted 654 Less:
Net income attributable to noncontrolling interests 12 --- Income
from continuing operations - as adjusted $642 ==== Diluted earnings
per share from continuing operations - as adjusted $2.08 =====
Weighted average common shares outstanding - diluted 308.9 =====
Pretax income margins - as adjusted 18.4% 16.3% N/A 15.8% ==== ====
=== ==== (1) Certain noteworthy items impacting pretax income in
2009 and 2008 are described in this schedule. The income (loss)
from continuing operations before provision for income tax, diluted
earnings per share from continuing operations and related margins
shown with the caption "as adjusted" are non-GAAP measures. (2) Tax
rate for continuing operations is 26.7% and 27.1% for the third
quarters ended September 30, 2009 and 2008, respectively, and 29.1%
and 27.4% for the nine months ended September 30, 2009 and 2008,
respectively (U.S. GAAP). All reconciling items are tax effected at
the above rates, except for the nine months 2009 reconciling items,
where the U.S. GAAP effective tax rate was adjusted to 27.7% to
exclude the impact of the 40% tax rate applied to the $83 million
U.S. pension curtailment gain. Aon Corporation - Restructuring
Plans (Unaudited) (1) 2007 Restructuring Plan By Type: Actual
------------------------------------- Full Full Third Nine Total
Year Year Quarter Months Incurred Estimated (millions) 2007 2008
2009 2009 to Date Total ---- ---- ---- ---- ------- ----- Workforce
reduction $17 $166 $48 $118 $301 $470 Lease consolidation 22 38 29
56 116 145 Asset impairments 4 18 3 7 29 38 Other costs associated
with restructuring 3 29 4 11 43 47 --- --- --- --- --- --- Total
restructuring and related expenses $46 $251 $84 $192 $489 $700 ===
==== === ==== ==== ==== By Segment: Risk and Insurance Brokerage
Services $41 $234 $69 $171 $446 $645 Consulting 5 17 15 21 43 55
--- --- --- --- --- --- Total restructuring and related expenses
$46 $251 $84 $192 $489 $700 === ==== === ==== ==== ==== Benfield
Restructuring Plan By Type: Operations --------------- Purchase
Price Third Nine Allocation Quarter Months Estimated (millions) (2)
2009 2009 Total ----------- -------- ------- --------- Workforce
reduction $51 $6 $31 $97 Lease consolidation 24 7 11 47 Asset
impairments - 1 2 8 Other costs associated with restructuring 2 1 1
3 --- --- --- --- Total restructuring and related expenses $77 $15
$45 $155 === === === ==== (1) In the Consolidated Summary of
Operations, workforce reductions are included in "Compensation and
benefits," lease consolidations and other costs associated with
restructuring are included in "Other general expenses," and asset
impairments are included in "Depreciation and amortization." (2)
Represents updated estimate of liabilities to be incurred within
one year of the acquisition date (11/30/08). Aon Corporation
Condensed Consolidated Statements of Financial Position As of
------------------------------ (millions) Sept. 30, 2009 Dec. 31,
2008 ---------- -------------- -------------- (Unaudited) ASSETS
-------- CURRENT ASSETS Cash and cash equivalents $580 $582
Short-term investments 602 684 Receivables 1,844 1,990 Fiduciary
assets (1) 9,551 10,678 Other current assets 349 355 Assets held
for sale - 237 --- --- Total Current Assets 12,926 14,526 Goodwill
5,957 5,637 Other intangible assets 763 779 Fixed assets, net 453
451 Investments 297 332 Other non-current assets 1,245 1,215 -----
----- TOTAL ASSETS $21,641 $22,940 ======= ======= LIABILITIES
-------------- CURRENT LIABILITIES Fiduciary liabilities $9,551
$10,678 Short-term debt 12 105 Accounts payable and accrued
liabilities 1,377 1,560 Other current liabilities 277 314
Liabilities held for sale - 146 --- --- Total Current Liabilities
11,217 12,803 Long-term debt 1,998 1,872 Pension, post employment
and post retirement liabilities 1,245 1,694 Other non-current
liabilities 1,051 1,156 ----- ----- TOTAL LIABILITIES 15,511 17,525
------ ------ TOTAL STOCKHOLDERS' EQUITY 5,990 5,310 Noncontrolling
interest 140 105 --- --- TOTAL EQUITY 6,130 5,415 ----- ----- TOTAL
LIABILITIES AND EQUITY $21,641 $22,940 ======= ======= (1) Includes
short-term investments: 2009 - $3,440; 2008 - $3,178. DATASOURCE:
Aon Corporation CONTACT: Investors, Scott Malchow, Vice President,
Investor Relations, +1-312-381-3983, or Media, David Prosperi, Vice
President, Global Public Relations, +1-312-381-2485, both of Aon
Corporation Web Site: http://www.aon.com/
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