AOC Aon Corp.

LONDON, Aug. 16 /PRNewswire-FirstCall/ -- Employer pension plans in the United States (US) are four times more likely to be fully funded than occupational pension plans in the United Kingdom (UK). This is according to the latest research(1) from Aon Consulting, a leading pensions, benefits and HR consulting firm who estimate that only 5% of UK pension plans are fully funded compared to 20% of US pension plans for year-end 2004 based on company annual reports. (Logo: http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO ) Comparing pension information for the US and UK companies with total pension assets of around $800bn in the US and euro350bn(2) in the UK, the research found that, on average, the pension plan deficit of a US company represents around two months worth of profits (before tax), compared to seven months of profits (before tax) for the average UK company. However, what is more alarming is that around 25% of companies in the UK have pension plans with a deficit representing over 2 years worth of profits, putting a significant strain on profitability, whereas less than 5% of US companies are in a similar position. The analysis further reveals that pension plans of US companies were 91% funded on FAS87 assumptions at the end of 2004, which compares with 85% funded for UK companies based on FRS17 assumptions, for the same period. One of the main reasons why US pension plans are better funded is because US companies have put in cash contributions of over 10% of plan assets over the last 2 years ($90bn), compared with only 7% for UK companies (euro25bn). Commenting on the analysis Andrew Claringbold of Aon Consulting in the UK said: "Contributions to UK pension plans have doubled over recent years. However, this increase in contributions has been insufficient to compensate for a combination of falling bond yields, increasing life expectancy and poor equity performance. "The fall in bond yields has had more of an impact in the UK than in the US. This is because benefits for most leavers and retirees in the UK have to be increased each year in line with the retail price index. Therefore, the amount of money required in the pension plan to meet these benefits is more susceptible to longer-term interest rates. This is not a standard pension requirement in the US. "More generally, UK companies have not increased their level of cash contributions to the same extent as their counterparts in the US. Therefore, there continues to be a great deal of pressure for pension plan cash contribution levels to remain at least as high as they are currently in the UK. This will be encouraged by the Pensions Act 2004, which will give Trustees of many pension plans more power in setting contributions and the Pension Protection Fund (PPF) levy, which is proposed to give incentives for companies to have better funded plans." Brad Klinck of Aon Consulting in the US said: "Although US plans are, on the whole, well funded, some plans have experienced real problems, including significant underfunding upon termination, that have affected the deficit at the Pension Benefit Guaranty Corporation (PBGC). Even though most large US plans are well funded, a significant number have recently looked to address funding concerns by making contributions well in excess of their minimum required contribution levels, increasing the funded status both of those specific plans, and of the group as a whole. It should be further noted that discussions surrounding changes to both US funding and accounting rules (FAS 87) are currently taking place, with concerns regarding the PBGC's funded status and convergence with global accounting standards accounting for much of the analysis on the funding and FAS sides respectively." For further information, please contact: Bridget Agnew / Lucy Bennett Nessa Kearney Financial Dynamics Aon Press Office T: 020 7269 7219/ 185 Tel: 020 7882 0067 Notes to editors: (1) The research is divided into two parts: a. The UK research looks at the disclosure of pension information of 200 of the largest UK companies - including all UK FTSE 100 companies with DB plans; a significant proportion of companies from the FTSE 250 with DB plans, and; the remaining number of companies were listed with the NAPF, as having pension fund assets in excess of 100m. b. The US research looks at disclosure of pension information of 80 Fortune 100 companies sponsoring defined benefit pension plans for which information was available in company annual reports. (2) The Aon Consulting research compares pension information data for US companies (using FAS87 accounting rules) with similar data for UK companies (using FRS17 accounting rules). Assets are measured on a market value basis in both countries. While FAS 87 allows the use of a "smoothed" asset value for purposes of calculating the annual pension expense, we used market value in all calculations. Liabilities are measured using the projected unit credit method with a discount rate based on current high-quality corporate bonds in both countries. Therefore, in theory the liabilities are comparable between the countries. About Aon Consulting Aon Consulting is a leading human capital consultancy, helping organisations of every size to attract and keep the employees they need. We advise on all aspects of employment, including health-related insurance and risk; employee compensation and pensions; human resource strategy planning; job design and change management; and staff assessment and legal issues. Aon Consulting is a division of Aon, the UK's largest insurance broker and provider of risk management services, a major force in reinsurance and the UK human capital consulting market. Aon Consulting Limited is authorised and regulated by the Financial Services Authority. About Aon Aon Corporation (NYSE:AOC) ( http://www.aon.com/ ) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 47,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions. 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, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of regulatory investigations brought by state attorneys general and state insurance regulators related to our compensation arrangements with underwriters and related issues, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, and ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates. 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. http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO http://photoarchive.ap.org/ DATASOURCE: Aon Corporation CONTACT: Bridget Agnew, or Lucy Bennett, both of Financial Dynamics, 020 7269 7219 - 185, or Nessa Kearney of Aon Press Office, 020 7882 0067 Web site: http://www.aon.com/

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