CHICAGO, Feb. 9 /PRNewswire-FirstCall/ -- Aon Corporation
(NYSE:AOC) today reported fourth quarter and full year 2005
results. Net income was $224 million or $0.65 per share in the
fourth quarter of 2005 and $81 million or $0.24 per share in 2004.
Fourth quarter 2005 net income from continuing operations increased
97% to $144 million or $0.42 per share compared to $73 million or
$0.22 per share a year ago. Net income for the full year of $737
million increased 35% from the prior year, and earnings per share
of $2.17 was up 33%. Full year 2005 net income from continuing
operations increased to $642 million or $1.89 per share from $545
million or $1.63 per share in 2004. Excluding certain items that
influenced the fourth quarter and full year results (as detailed in
the attached supplemental schedules), net income per share from
continuing operations was $0.67 and $2.21 for the fourth quarter
and twelve months 2005, respectively. Greg Case, Aon's president
and CEO, said, "Our fourth quarter operating results show strong
underlying margin improvement. Americas Brokerage, led by our U.S.
and Latin America Retail businesses, showed very solid organic
growth, continuing a trend which emerged previously in 2005. Our
Affinity business continues to make an important contribution to
organic revenue growth, and we continue to take steps to strengthen
that business. For each of our operating segments, 2005 marked a
year of good progress toward realizing the full potential of our
tremendous portfolio of businesses." Restructuring Plan The
previously announced three-year restructuring plan is currently
expected to result in cumulative pretax charges of $262 million,
including employee termination and lease consolidation costs, asset
impairments, and other costs associated with the restructuring.
Annualized cost savings are now targeted at approximately $180
million by 2008. Certain aspects of the plan are not finalized, and
actual total costs, the timing of the costs, and ultimate savings
may vary from the estimates due to changes in the scope or
assumptions underlying this plan. An analysis of restructuring
related expenses by segment for the fourth quarter and full year
2005 is presented in the attached reconciliation of non-GAAP
measures. Below is a summary of third and fourth quarter 2005
restructuring costs and an estimate of restructuring and related
expenses through the end of 2007 by type and by geographic region.
(millions) Actual Estimated
-------------------------------------------------- Third Fourth By
Type: Quarter Quarter Total Annual Annual 2005 2005 2005 2006 2007
Total -------------------------------------------------- Workforce
reduction $2 $ 114 $ 116 $ 33 $8 $ 157 Lease consolidation 15 5 20
31 6 57 Asset impairments 15 2 17 2 4 23 Other costs associated
with restructuring 3 2 5 15 5 25
-------------------------------------------------- Total
restructuring and related expenses $ 35 $ 123 $ 158 $ 81 $ 23 $ 262
================================================== (millions)
United United Continent Rest By Region: States Kingdom of Europe of
World Total
-------------------------------------------------------- 2005
(incurred) $28 $92 $ 30 $8 $ 158 2006 estimated 25 44 10 2 81 2007
estimated 12 11 - - 23
-------------------------------------------------------- Total
incurred and remaining estimated $65 $ 147 $ 40 $ 10 $ 262
======================================================== Fourth
Quarter and Twelve Months Segment Review Risk and Insurance
Brokerage Services fourth quarter revenue of $1.4 billion was
essentially unchanged from the prior year, with 3% organic revenue
growth. Contingent commission revenue reflecting amounts relating
to arrangements in existence prior to October 1, 2004 was $4
million in the fourth quarter of 2005 and $11 million in fourth
quarter 2004. Contingent commission revenue was $26 million and
$111 million for the twelve months of 2005 and 2004, respectively.
Organic revenue in Brokerage-Americas rose 10%, primarily driven by
the impact of new business in all geographic regions as well as in
the Affinity business. Brokerage-International organic revenue
declined 3%, with strong new business generation in Continental
Europe offset by weaker revenue performance in the U.K. A 1%
decline in Reinsurance organic growth reflected the impact of
higher risk retention by clients and weaker pricing in the
international markets, partially offset by new business in the
Americas. Fourth quarter pretax income increased to $134 million
from $12 million in 2004, and the pretax margin improved to 9.3%
from 0.8% a year ago. Excluding unusual items as detailed in the
attached reconciliations of non-GAAP measures, the pretax margin
improved to 17.4% in 2005 from 12.8% in 2004, driven by a 5%
decline in expenses. Twelve months pretax income increased 25% to
$719 million and the pretax margin improved 280 basis points to
13.3% from 10.5%. Excluding certain unusual items, the brokerage
pretax margin was 16.0% for 2005 and 13.6% for 2004. Consulting
revenue of $336 million declined 1% during the quarter on both a
reported and an organic basis. Lost business and lower levels of
new business in the U.S. contributed to a 4% decline in Outsourcing
organic revenue. Contingent commission revenue was $2 million and
$4 million in the fourth quarter of 2005 and 2004, and $6 million
and $21 million for the twelve months of 2005 and 2004,
respectively. Fourth quarter pretax income increased 82% to $40
million, and the pretax margin was 11.9% for 2005 and 6.5% for
2004. A principal contributor to the year over year improvement was
the impact of the provision for legal settlements in the fourth
quarter of 2004. Twelve months pretax income increased 5% to $110
million and the pretax margin was 8.8% in 2005 compared to 8.4% in
2004. Insurance Underwriting revenue was $756 million in the
quarter, with segment organic revenue growth, which is based on
written premiums and fees, of 9%. In the Accident & Health and
Life business, organic revenue grew 10%, primarily driven by strong
growth in the sales of a supplemental health product. Warranty,
Credit and Property & Casualty organic revenue growth was 8% in
the quarter. Fourth quarter pretax income rose 30% to $79 million
reflecting strong growth in sales of a supplemental health product,
improved profitability in the specialty property and casualty
business, and higher investment income. The pretax margin improved
to 10.4% in 2005 from 7.8% in 2004. Twelve months pretax income
increased 24% to $314 million and the pretax margin improved to
9.8% from 8.1% in 2004. Corporate and Other segment revenue was $21
million in the quarter compared to $61 million in 2004. Fourth
quarter 2004 results included a $37 million pretax gain on the sale
of Endurance common stock. The pretax loss in the Corporate and
Other segment was $47 million compared with a loss of $2 million a
year ago, principally driven by the gain on sale of Endurance
common stock in 2004 and higher general expenses including
restructuring costs in 2005. The pretax loss for twelve months was
$178 million compared to a pretax loss of $108 million a year ago,
primarily reflecting the 2004 gain on sale of Endurance common
stock, the impact of the Company's investment in Endurance common
stock and warrants, and higher general expenses including 2005
restructuring costs. Discontinued Operations Fourth quarter after
tax income from discontinued operations was $80 million ($0.23 per
share) in 2005, primarily reflecting the gain on sale of Aon's
U.S.-based wholesale broking operation, Swett & Crawford.
Effective Tax Rate and Earnings Repatriation The effective tax rate
for continuing operations was 30.1% for the fourth quarter of 2005
compared to 21.5% for the fourth quarter of 2004. The full year tax
rates for 2005 and 2004 were 33.5% and 34.1%, respectively. The
effective tax rate for the fourth quarter of 2005 reflects the
favorable resolution of tax issues and lower effective state tax
rates, partially offset by the impact of restructuring charges. In
2004, a one-time tax benefit resulting from the difference between
Aon's tax and book basis in Cambridge (U.S. claims services
business sold in 2004) reduced the effective tax rate. In the
fourth quarter of 2005, Aon repatriated $101 million of foreign
earnings pursuant to the special tax incentives of the American
Jobs Creation Act of 2004. The Company incurred $5 million ($0.01
per share) of tax expense in connection with the repatriated
earnings. Foreign Exchange Impact Fourth quarter 2005 earnings per
share were not affected by foreign currency translation. Fourth
quarter 2005 and 2004 earnings per share included $0.02 and $0.05
of currency hedging gains, respectively. Twelve months 2005
earnings per share were positively affected by $0.05 related to
foreign currency translation gains. In addition, twelve months 2005
and 2004 earnings per share included $0.08 and $0.11 of currency
hedging gains, respectively. Financial Condition Total debt and
preferred stock decreased $55 million to $2.1 billion at December
31, 2005 from December 31, 2004. Total debt and preferred stock as
a percentage of total capital was reduced to 28% from 30% over the
same period. Stockholders' equity was $5.3 billion. Compared to
September 30, 2005, total debt increased $225 million primarily
reflecting an increase in funds borrowed by certain of the
Company's foreign subsidiaries to offset earnings repatriated
during the quarter. During 2005, Aon made cash contributions of
$463 million to its principal pension plans, including a $200
million contribution to the U.S. pension plan in the fourth quarter
of 2005. Approximately 94% of Aon's investment portfolio at quarter
end was in short-term and fixed maturities, with 98% of the fixed
income securities rated investment grade. Stock Repurchase Program
During the fourth quarter of 2005, Aon completed the repurchase of
675,000 shares of common stock for $24.7 million under the existing
$1 billion buyback authorization. The Company will host an audio
webcast on Friday, February 10 at 10:00 a.m. central time that can
be accessed at http://www.aon.com/ . Aon Corporation (
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, our ability to implement
restructuring initiatives and other initiatives intended to yield
cost savings, our ability to execute the stock repurchase program,
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
investigations brought by state attorneys general, state insurance
regulators, federal prosecutors, and federal regulators, 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. This press release
includes supplemental information related to organic revenue
growth, a measure that management believes is important to evaluate
changes in revenue from existing operations. We believe that this
supplemental information is helpful to investors. Organic revenue
growth excludes from reported revenues the impact of foreign
exchange, acquisitions, divestitures, transfers between business
units, investment income, reimbursable expenses, unusual items, and
for the underwriting segment only, an adjustment between written
and earned premium. A reconciliation is provided in the attached
schedules. The supplemental organic revenue growth information does
not affect net income or any other GAAP reported amounts. It 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 revenue performance,
although they may not make identical adjustments. This press
release also includes supplemental information related to several
measures -- income per share, expenses, and margins -- that exclude
the effects of the restructuring charges and certain other
noteworthy items that impacted revenue and pretax income in the
comparable periods. Management believes that these measures are
important to make meaningful period-to-period comparisons and that
this supplemental information is helpful to investors. The measures
that exclude the effects of the restructuring charges and certain
other items do not affect net income or any other GAAP reported
amounts. 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. Aon Corporation Consolidated Summary of Operations
Fourth Quarter Ended Twelve Months Ended
----------------------------------------------------- (millions
except per share data) Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31,
Percent 2005 2004(1) Change 2005 2004(1) Change
----------------------------------------------------- Revenue
Brokerage commissions and fees $1,725 $1,791 (4)% $6,646 $6,822
(3)% Premiums and other 700 687 2 2,848 2,788 2 Investment income
105 122 (14) 343 321 7 -------- ------- ------ ------- -------
----- Total revenue 2,530 2,600 (3) 9,837 9,931 (1) --------
------- ------ ------- ------- ----- Expenses General expenses
1,849 1,855 - 6,914 6,969 (1) Benefits to policyholders 375 362 4
1,551 1,516 2 Depreciation and amortization 68 75 (9) 277 303 (9)
Interest expense 31 35 (11) 125 136 (8) Provision for New York and
other state settlements 1 180 (99) 5 180 (97) -------- ------ -----
------ ------ ----- Total expenses 2,324 2,507 (7) 8,872 9,104 (3)
-------- ------ ----- ------ ------ ----- Income from continuing
operations before provision for income tax 206 93 122 965 827 17
Provision for income tax (3) 62 20 210 323 282 15 ---- ---- -----
----- ----- ---- Income from continuing operations 144 73 97 642
545 18 Income from discontinued operations, net of tax 80 8 +500 95
1 +500 -------- ---- ----- ----- ----- ------ Net income $224 $81
177% $737 $546 35% ======== ==== ===== ===== ===== ====== Preferred
stock dividends - (1) N/A (2) (3) N/A -------- ---- ----- -----
----- ------ Net income available for common stockholders $224 $80
180% $735 $543 35% ======== ==== ===== ===== ===== ======= Basic
net income per share: Income from continuing operations $0.44 $0.23
91% $1.99 $1.70 17% Discontinued operations 0.25 0.02 +500 0.29 -
N/A ------- ------- ------ ----- ----- ---- Net income $0.69 $0.25
176% $2.28 $1.70 34% ======= ======= ====== ===== ===== ====
Diluted net income per share: Income from continuing operations
$0.42 $0.22 91% $1.89 $1.63 16% Discontinued operations 0.23 0.02
+500 0.28 - N/A ------ ----- ----- ------ ------ ----- Net income
$0.65 $0.24 171% $2.17 $1.63 33% ====== ===== ===== ====== ======
===== Diluted average common and common equivalent shares
outstanding (2) 347.5 336.4 341.5 336.6 ====== ===== ====== ======
(1) Certain amounts relating to discontinued operations have been
reclassified to conform to the 2005 presentation. (2) In accordance
with EITF 04-08, the diluted net income per share calculations for
the fourth quarters and twelve months ended December 31, 2005 and
2004 include 14 million additional shares related to the potential
conversion of our 3.5% Senior Convertible Debentures. In addition,
the net income used in the calculation includes after- tax interest
expense of approximately $2 million for the fourth quarters and $7
million for the twelve months ended December 31, 2005 and 2004. (3)
Tax rate is 30.1% and 21.5% for the fourth quarters ended December
31, 2005 and 2004, respectively, and 33.5% and 34.1% for the twelve
months ended December 31, 2005 and 2004, respectively. Aon
Corporation Segments - Fourth Quarter Continuing Operations Fourth
Quarter Ended
------------------------------------------------------- Organic
Less: Revenue Acquisi- Growth tions, Orga- with- Divesti- nic out
Dec. Less: tures Less: Rev- Contin- Dec. 31, Cur- & All enue
gent 31, 2004 Percent rency Trans- Other Growth Comm- 2005 (1)
Change Impact fers (2) (3) issions ------ ------ ------- ------
------- ----- ------ ------- (millions) Revenue Risk and insurance
brokerage services Risk management and insurance brokerage -
Americas $637 $560 14% 1% -% 3% 10% 9% Risk management and
insurance brokerage - International 604 638 (5) (5) 2 1 (3) (1)
Reinsurance brokerage and related services 193 199 (3) (1) - (1)
(1) (1) Claims services - 39 (100) - (100) - - - ------ ------
------- ------ ------- ----- ------ ------- Total risk and
insurance brokerage services 1,434 1,436 - (2) (2) 1 3 3 ------
------ ------- ------ ------- ----- ------ ------- Consulting
Consulting services 267 265 1 (2) 2 1 - - Outsourcing 69 76 (9) (1)
(2) (2) (4) (4) ------ ------ ------- ------ ------- ----- ------
------- Total consulting 336 341 (1) (2) 1 1 (1) (1) ------ ------
------- ------ ------- ----- ------ ------- Insurance underwriting
Accident & health and life 462 432 7 (1) - (2) 10 10 Warranty,
credit and property & casualty 294 353 (17) (2) - (23) 8 8
------ ------ ------- ------ ------- ----- ------ ------- Total
insurance underwriting 756 785 (4) (1) - (12) 9 9 ------ ------
------- ------ ------- ----- ------ ------- Corporate and other 21
61 (66) N/A N/A N/A N/A N/A Intersegment revenues (17) (23) N/A N/A
N/A N/A N/A N/A ------ ------ ------- ------ ------- ----- ------
------- Total $2,530 $2,600 (3)% (2)% (1)% (4)% 4% 4% ====== ======
======= ====== ======= ===== ====== ======= Investment income
(included in Revenue above) Risk and insurance brokerage services
$42 $26 62% Consulting 1 1 - Insurance underwriting 41 34 21
Corporate and other 21 61 (66) ------ ------ ------- Total $105
$122 (14)% ====== ====== ======= Income (loss) from continuing
operations before provision for income tax Risk and insurance
brokerage services $134 $12 +500% Consulting 40 22 82 Insurance
underwriting 79 61 30 Corporate and other (47) (2) N/A ------
------ ------- Total $206 $93 122% ====== ====== ======= Income
from continuing operations before provision for income tax -
margins Risk and insurance brokerage services 9.3% 0.8% Consulting
11.9% 6.5% Insurance underwriting 10.4% 7.8% Total 8.1% 3.6% (1)
Certain amounts relating to discontinued operations have been
reclassified to conform to the 2005 presentation. (2) Includes the
impact of investment income, reimbursable expenses, adjustment
between written and earned premium and fees in insurance
underwriting only, and unusual items. (3) Organic revenue growth
excludes the impact of foreign exchange, acquisitions,
divestitures, transfers and items described in (2). Written
premiums and fees are the basis for organic revenue growth within
the Insurance Underwriting segment. Aon Corporation Segments -
Year-to-date Continuing Operations Twelve Months Ended
------------------------------------------------------- Organic
Less: Revenue Acquisi- Growth tions, Orga- with- Divesti- nic out
Dec. Less: tures Less: Rev- Contin- Dec. 31, Cur- & All enue
gent 31, 2004 Percent rency Trans- Other Growth Comm- 2005 (1)
Change Impact fers (2) (3) issions ------ ------ ------- ------
------- ----- ------ ------- (millions) Revenue Risk and insurance
brokerage services Risk management and insurance brokerage -
Americas $2,172 $2,067 5% 1% -% 2% 2% 5% Risk management and
insurance brokerage - International 2,383 2,357 1 1 2 - (2) (1)
Reinsurance brokerage and related services 845 861 (2) 1 - 2 (5)
(5) Claims services - 212 (100) - (100) - - - ------ ------ -------
------ ------- ----- ------ ------- Total risk and insurance
brokerage services 5,400 5,497 (2) 1 (3) 1 (1) 1 ------ ------
------- ------ ------- ----- ------ ------- Consulting Consulting
services 981 949 3 1 2 - - 2 Outsourcing 274 298 (8) - (2) 1 (7)
(7) ------ ------ ------- ------ ------- ----- ------ ------- Total
consulting 1,255 1,247 1 - 1 2 (2) - ------ ------ ------- ------
------- ----- ------ ------- Insurance underwriting Accident &
health and life 1,805 1,721 5 1 - (1) 5 5 Warranty, credit and
property & casualty 1,383 1,429 (3) - - (2) (1) (1) ------
------ ------- ------ ------- ----- ------ ------- Total insurance
under- writing 3,188 3,150 1 1 - (2) 2 2 ------ ------ -------
------ ------- ----- ------ ------- Corporate and other 56 109 (49)
N/A N/A N/A N/A N/A Intersegment revenues (62) (72) N/A N/A N/A N/A
N/A N/A ------ ------ ------- ------ ------- ----- ------ -------
Total $9,837 $9,931 (1)% 1% (2)% -% -% 1% ====== ====== =======
====== ======= ===== ====== ======= Investment income (included in
Revenue above) Risk and insurance brokerage services $129 $80 61%
Consulting 4 3 33 Insurance underwriting 154 129 19 Corporate and
other 56 109 (49) ------ ------ ------- Total $343 $321 7% ======
====== ======= Income (loss) from continuing operations before
provision for income tax Risk and insurance brokerage services $719
$576 25% Consulting 110 105 5 Insurance underwriting 314 254 24
Corporate and other (178) (108) N/A ------ ------ ------- Total
$965 $827 17% ====== ====== ======= Income from continuing
operations before provision for income tax - margins Risk and
insurance brokerage services 13.3% 10.5% Consulting 8.8% 8.4%
Insurance underwriting 9.8% 8.1% Total 9.8% 8.3% (1) Certain
amounts relating to discontinued operations have been reclassified
to conform to the 2005 presentation. (2) Includes the impact of
investment income, reimbursable expenses, adjustment between
written and earned premium and fees in insurance underwriting only,
and unusual items. (3) Organic revenue growth excludes the impact
of foreign exchange, acquisitions, divestitures, transfers and
items described in (2). Written premiums and fees are the basis for
organic revenue growth within the Insurance Underwriting segment.
Aon Corporation Corporate and Other - Continuing Operations Fourth
Quarter Ended Twelve Months Ended --------------------
------------------- Dec. Dec. Dec. Dec. 31, 31, Percent 31, 31,
Percent (millions) 2005 2004 Change 2005 2004 Change ----- ----
------- ---- ---- ------- Revenue Income from marketable equity
securities and other investments (1) $18 $13 38 % $44 $49 (10)%
Limited partnership investments - - - 1 6 (83) Net gain on
disposals and related expenses (2) 3 48 (94) 11 54 (80) ---- ----
---- ---- ---- ---- Total revenue 21 61 (66) 56 109 (49) Expenses
General expenses 37 28 32 109 81 35 Interest expense 31 35 (11) 125
136 (8) ---- ---- ---- --- --- --- Total expenses 68 63 8 234 217 8
---- ---- ---- --- --- --- Loss before income tax $(47) $(2) N/A %
$(178) $(108) N/A % ==== ==== ==== === === === Notes: Fourth
Quarter Ended Twelve Months Ended ------------------
------------------- Dec. Dec. Dec. Dec. 31, 31, Percent 31, 31,
Percent 2005 2004 Change 2005 2004 Change ---- ---- ------ ----
---- ------ (1) Includes (millions): Income from Endurance warrants
$8 $9 (11)% $10 $- N/A % Equity earnings - Endurance - - - - 38
(100) ---- ---- ----- --- --- ------ Total $8 $9 (11)% $10 $38
(74)% ==== ==== ===== === === ====== (2) Includes gain on sale of
Endurance stock (millions) $- $37 (100)% $1 $48 (98)% Aon
Corporation Reconciliation of the Impact of Non-GAAP Measures on
Diluted Earnings Per Share from Continuing Operations Fourth
Quarter and Twelve Months Ended December 31, 2005 and 2004 Fourth
Quarter Ended Twelve Months Ended --------------------
------------------- Dec. Dec. Dec. Dec. 31, 31, Percent 31, 31,
Percent (millions except per share data) 2005 2004 Change 2005 2004
Change ---- ---- ------ ---- ---- ------ Diluted earnings per share
from continuing operations - as reported $0.42 $0.22 91 % $1.89
$1.63 16 % After tax earnings per share adjustments: Provision for
Daniel & NY and other state settlements - 0.42 0.01 0.42
Restructuring charges 0.25 - 0.31 - Gain on sale of Cambridge -
(0.12) - (0.12) Gain on sale of Endurance common stock - (0.07) -
(0.09) Endurance common stock equity earnings - - - (0.07) -----
----- ----- ------ Total after tax earnings per share adjustments
0.25 0.23 0.32 0.14 ----- ----- ----- ------ Diluted earnings per
share from continuing operations - as adjusted $0.67 $0.45 49 %
$2.21 $1.77 25 % ===== ===== ===== ===== ===== ==== Diluted average
common and common equivalent shares outstanding 347.5 336.4 341.5
336.6 ===== ===== ===== ===== Aon Corporation Reconciliation of
Non-GAAP Measures - Segments Fourth Quarter and Twelve Months Ended
December 31, 2005 and 2004 (1) Fourth Quarter Ended December 31,
2005 --------------------------------- (millions) Risk and Insur-
Insurance ance Brokerage Consult- Under- Corporate Services ing
writing & Other Total --------- ------- ------- --------- -----
Revenue as reported $1,434 $336 $756 $4 $2,530 Gain on sale of
Endurance common stock - - - - - --------- ------- ------- --------
------ Revenue as adjusted $1,434 $336 $756 $4 $2,530 =========
======= ======= ======== ====== Income (loss) from continuing
operations before provision for income tax - as reported $134 $40
$79 $(47) $206 Provision for Daniel & NY and other state
settlements 1 - - - 1 Restructuring charges 114 4 3 2 123 Gain on
sale of Endurance common stock - - - - - ------ ------ ------
------ ------ Income (loss) from continuing operations before
provision for income tax - as adjusted $249 $44 $82 $(45) $330
======= ====== ====== ====== ====== Income from continuing
operations before provision for income tax - margins as adjusted
17.4% 13.1% 10.8% N/A 13.0% ====== ====== ====== ====== =======
Twelve Months Ended December 31, 2005
------------------------------------- (millions) Risk and Insur-
Insurance ance Brokerage Consult- Under- Corporate Services ing
writing & Other Total -------- -------- -------- --------
------ Revenue as reported $5,400 $1,255 $3,188 $(6) $9,837 Gain on
sale of Endurance common stock - - - (1) (1) -------- ------ ------
----- ------ Revenue as adjusted $5,400 $1,255 $3,188 $(7) $9,836
======== ====== ====== ===== ====== Income (loss) from continuing
operations before provision for income tax - as reported $719 $110
$314 $(178) $965 Provision for Daniel & NY and other state
settlements 4 1 - - 5 Restructuring charges 143 8 3 4 158 Gain on
sale of Endurance common stock - - - (1) (1) ----- ------- ------
------ -------- Income (loss) from continuing operations before
provision for income tax - as adjusted $866 $119 $317 $(175) $1,127
===== ======= ====== ====== ======== Income from continuing
operations before provision for income tax - margins as adjusted
16.0% 9.5% 9.9% N/A 11.5% ===== ======= ====== ====== =========
Fourth Quarter Ended December 31, 2004
-------------------------------------- (millions) Risk and Insur-
Insurance ance Brokerage Consult- Under- Corporate Services ing
writing & Other Total --------- ------- ------- --------- -----
Revenue as reported $1,436 $341 $785 $38 $2,600 Endurance common
stock equity earnings - - - - - Gain on sale of Endurance common
stock - - - (37) (37) ------- ------ ----- ----- ------- Revenue as
adjusted $1,436 $341 $785 $1 $2,563 ======= ====== ===== =====
======= Income (loss) from continuing operations before provision
for income tax - as reported $12 $22 $61 $(2) $93 Provision for
Daniel & NY and other state settlements 187 33 - - 220 Gain on
sale of Cambridge (15) - - - (15) Gain on sale of Endurance common
stock - - - (37) (37) Endurance common stock equity earnings - - -
- - ------ ----- ----- ----- ------ Income (loss) from continuing
operations before provision for income tax - as adjusted $184 $55
$61 $(39) $261 ====== ===== ===== ===== ====== Income from
continuing operations before provision for income tax - margins as
adjusted 12.8% 16.1% 7.8% N/A 10.2% ====== ===== ==== ===== ======
Twelve Months Ended December 31, 2004
------------------------------------- (millions) Risk and Insur-
Insurance ance Brokerage Consult- Under- Corporate Services ing
writing & Other Total --------- ------- ------- --------- -----
Revenue as reported $5,497 $1,247 $3,150 $37 $9,931 Endurance
common stock equity earnings - - - (38) (38) Gain on sale of
Endurance common stock - - - (48) (48) -------- ------- -------
-------- ------- Revenue as adjusted $5,497 $1,247 $3,150 $(49)
$9,845 ======== ======= ======= ======== ======= Income (loss) from
continuing operations before provision for income tax - as reported
$576 $105 $254 $(108) $827 Provision for Daniel & NY and other
state settlements 187 33 - - 220 Gain on sale of Cambridge (15) - -
- (15) Gain on sale of Endurance common stock - - - (48) (48)
Endurance common stock equity earnings - - - (38) (38) -------
------ ---- ----- ------ Income (loss) from continuing operations
before provision for income tax - as adjusted $748 $138 $254 $(194)
$946 ======= ====== ==== ====== ====== Income from continuing
operations before provision for income tax - margins as adjusted
13.6% 11.1% 8.1% N/A 9.6% ======= ====== ===== ==== ===== (1)
Several noteworthy items impacted revenue and pretax income in 2005
and 2004, which are described in this schedule. The pretax income
(loss) amounts and related margins shown in the captions "Income
(loss) from continuing operations before provision for income tax -
as adjusted" are non-GAAP measures. Aon Corporation Consolidated
Summary of Operations - Reclassified for Discontinued Operations
2004 2005
---------------------------------------------------------------------
(millions except per share data) 1st 2nd 3rd 4th Full 1st 2nd 3rd
Nine Quarter Quarter Quarter Quarter Year Quarter Quarter Quarter
Months
---------------------------------------------------------------------
Revenue ------- Brokerage commissions and fees $1,739 $1,691 $1,601
$1,791 $6,822 $1,675 $1,664 $1,582 $4,921 Premiums and other 692
716 693 687 2,788 698 718 732 2,148 Investment income 80 69 50 122
321 91 74 73 238 ------ ------ ------ ------ ------ ------ ------
------ ------ Total revenue 2,511 2,476 2,344 2,600 9,931 2,464
2,456 2,387 7,307 ------ ------ ------ ------ ------ ------ ------
------ ------ Expenses -------- General expen- ses 1,725 1,707
1,682 1,855 6,969 1,659 1,711 1,695 5,065 Benefits to policy-
holders 383 392 379 362 1,516 393 381 402 1,176 Depreciation &
amort- ization 69 82 77 75 303 67 62 80 209 Interest expense 34 35
32 35 136 34 31 29 94 Provision for New York and other state
settle- ments - - - 180 180 1 2 1 4 ------ ------ ------ ------
------ ------ ------ ------ ------ Total expen- ses 2,211 2,216
2,170 2,507 9,104 2,154 2,187 2,207 6,548 ------ ------ ------
------ ------ ------ ------ ------ ------ Income from continuing
operations before provision for income tax 300 260 174 93 827 310
269 180 759 Provision for income tax 107 93 62 20 282 112 89 60 261
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from continuing oper- ations 193 167 112 73 545 198 180 120
498 Income (loss) from discontinued operations, net of tax (23) 6
10 8 1 2 11 2 15 ------ ------ ------ ------ ------ ------ ------
------ ------ Net income $170 $173 $122 $81 $546 $200 $191 $122
$513 ====== ====== ====== ====== ====== ====== ====== ====== ======
Preferred stock divi- dends (1) - (1) (1) (3) (1) - (1) (2) ------
------ ------ ------ ------ ------ ------ ------ ------ Net income
available for common stock- holders $169 $173 $121 $80 $543 $199
$191 $121 $511 ====== ====== ====== ====== ====== ====== ======
====== ====== Basic net income per share: Income from continuing
operat- ions $0.60 $0.52 $0.35 $0.23 $1.70 $0.61 $0.56 $0.36 $1.54
Discontinued operat- ions (0.07) 0.02 0.03 0.02 - 0.01 0.03 0.01
0.05 ------ ------ ------ ------ ------ ------ ------ ------ ------
Net in- come $0.53 $0.54 $0.38 $0.25 $1.70 $0.62 $0.59 $0.37 $1.59
====== ====== ====== ====== ====== ====== ====== ====== ======
Dilutive net income per share: Income from continuing operat- ions
$0.58 $0.50 $0.33 $0.22 $1.63 $0.58 $0.54 $0.35 1.48 Discontinued
operat- ions (0.07) 0.02 0.03 0.02 - 0.01 0.03 0.01 0.04 ------
------ ------ ------ ------ ------ ------ ------ ------ Net in-
come $0.51 $0.52 $0.36 $0.24 $1.63 $0.59 $0.57 $0.36 1.52 ======
====== ====== ====== ====== ====== ====== ====== ====== Dilutive
average common and common equivalent shares out- stand- ing 335.3
337.1 337.4 336.4 336.6 337.1 338.5 342.7 339.4 ====== ======
====== ====== ====== ====== ====== ====== ====== Note: The above
information represents the reclassification to discontinued
operations of the results of a non-core brokerage operation in
Australia. Aon Corporation Segments - Reclassification for
Discontinued Operations 2004 2005
---------------------------------------------------------------------
(millions) 1st 2nd 3rd 4th Full 1st 2nd 3rd Nine Quarter Quarter
Quarter Quarter Year Quarter Quarter Quarter Months
---------------------------------------------------------------------
Revenue ------- Risk and insurance brokerage services As report- ed
$1,413 $1,366 $1,289 $1,442 $5,510 $1,354 $1,336 $1,283 $3,973
Less: reclass- ification to dis- continued operat- ions (2) (2) (3)
(6) (13) (2) (2) (3) (7) ------ ------ ------ ------ ------ ------
------ ------ ------ As re- classifi- ed 1,411 1,364 1,286 1,436
5,497 1,352 1,334 1,280 3,966 ------ ------ ------ ------ ------
------ ------ ------ ------ Consult- ing 301 305 300 341 1,247 309
315 295 919 Insur- ance under- writ- ing 781 805 779 785 3,150 789
816 827 2,432 Corporate and other 36 18 (6) 61 109 29 6 - 35 Inter-
segment reven- ues (18) (16) (15) (23) (72) (15) (15) (15) (45)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total $2,511 $2,476 $2,344 $2,600 $9,931 $2,464 $2,456 $2,387
$7,307 ====== ====== ====== ====== ====== ====== ====== ======
====== Income (Loss) Before Income Tax -------------- Risk and
insurance brokerage services As report- ed $243 $191 $131 $15 $580
$240 $208 $138 $586 Less: reclass- ification to discontin- ued
oper- ations - - (1) (3) (4) - - (1) (1) ------ ------ ------
------ ------ ------ ------ ------ ------ As re- classif- ied 243
191 130 12 576 240 208 137 585 ------ ------ ------ ------ ------
------ ------ ------ ------ Consult- ing 26 28 29 22 105 26 29 15
70 Insurance under- writing 53 73 67 61 254 68 83 84 235 Corporate
and other (22) (32) (52) (2) (108) (24) (51) (56) (131) ------
------ ------ ------ ------ ------ ------ ------ ------ Total $300
$260 $174 $93 $827 $310 $269 $180 $759 ====== ====== ====== ======
====== ====== ====== ====== ====== Income from continuing
operations before income tax - margins -------------- Risk and
insurance brokerage services As report- ed 17.2% 14.0% 10.2% 1.0%
10.5% 17.7% 15.6% 10.8% 14.7% As re- classifi- ed 17.2% 14.0% 10.1%
0.8% 10.5% 17.8% 15.6% 10.7% 14.8% Consult- ing 8.6% 9.2% 9.7% 6.5%
8.4% 8.4% 9.2% 5.1% 7.6% Insurance under- writ- ing 6.8% 9.1% 8.6%
7.8% 8.1% 8.6% 10.2% 10.2% 9.7% Total As report- ed 11.9% 10.5%
7.5% 3.7% 8.4% 12.6% 10.9% 7.6% 10.4% As re- classifi- ed 11.9%
10.5% 7.4% 3.6% 8.3% 12.6% 11.0% 7.5% 10.4% Note: The above
information represents the reclassification to discontinued
operations of the results of a non-core brokerage operation in
Australia. Aon Corporation Preliminary Consolidated Statements of
Financial Position As of ---------------------------- (billions)
Dec. 31, 2005 Dec. 31, 2004 ------------- ------------- (Unaudited)
ASSETS Investments Fixed maturities at fair value $ 4.2 $ 3.5
Short-term investments 4.3 4.4 Other investments 0.6 0.5 ------
------ Total investments 9.1 8.4 Cash 0.5 0.6 Receivables 9.7 9.9
Deferred Policy Acquisition Costs 1.2 1.1 Goodwill 4.4 4.6 Other
Intangible Assets 0.1 0.1 Property and Equipment, net 0.5 0.7 Other
Assets 2.3 2.9 ------ ------ TOTAL ASSETS $ 27.8 $ 28.3 ======
====== LIABILITIES AND STOCKHOLDERS' EQUITY Insurance Premiums
Payable $ 9.4 $ 9.8 Policy Liabilities Future policy benefits 1.7
1.5 Policy and contract claims 1.8 1.9 Unearned and advance
premiums and contract fees 3.0 3.0 ------ ------ Total Policy
Liabilities 6.5 6.4 General Liabilities General expenses 1.7 1.6
Notes payable 2.1 2.1 Pension, post-employment and post-retirement
liabilities 1.5 1.5 Other liabilities 1.3 1.8 ------ ------ TOTAL
LIABILITIES 22.5 23.2 Commitments and Contingent Liabilities
Stockholders' Equity 5.3 5.1 ------ ------ TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 27.8 $ 28.3 ====== ====== Investor Contact:
Craig Streem Corporate Vice President, Investor Relations
312-381-3983 Media Contact: Al Orendorff Director, Public Relations
312-381-3153 First Call Analyst: FCMN Contact: elena_sioson@aon.com
DATASOURCE: Aon Corporation CONTACT: Investors, Craig Streem,
Corporate Vice President, Investor Relations, +1-312-381-3983, or,
Media, Al Orendorff, Director, Public Relations, +1-312-381-3153,
both of Aon Corporation Web site: http://www.aon.com/
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