AOC Aon Corp.

CHICAGO, March 14 /PRNewswire-FirstCall/ -- Aon Re Global has again produced groundbreaking research on the impact of earnings volatility on shareholder value for insurers and reinsurers. Hurricane Katrina and the entire hurricane season provided an interesting opportunity to observe, at an event and season level, the investor response to the related earnings and capital volatility. (Logo: http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO ) Mike Bungert, CEO of Aon Re Inc. commented on the study, "Katrina is the first significant natural catastrophe since Northridge and Andrew to truly test the risk and capital management plans of insurers and reinsurers. The relative intolerance of catastrophe risk from shareholders as seen through these events is instructive. Shareholders represent a tighter constraint on capital and earnings than rating agencies." Most of the industry discussion post-Hurricane Katrina has focused on the significant rating agency model changes and the compounding effect of catastrophe model changes. The Aon Re Global study tells the investor side of the story and represents an important addition to the information needed to optimize catastrophe retentions, limits and the use of the varying forms of underwriting capital. Aon Re's dominant Prime Re DFA tool incorporates investor, rating agency and other constraints as it solves for optimal combinations of underwriting capital. Underwriting capital consists of equity, policyholders' surplus, hybrid instruments, reinsurance, ART products, insurance linked securities and contingent capital. Stephen Mildenhall, Aon Re Services EVP and author of the regression and study, summarized two of the key results, "Investors clearly understand the differences between insurers and reinsurers and have set differing tolerances for each. Our study confirms that investors expect higher earnings and capital volatility from reinsurers than they expect from insurers. Key points in the regression showed that insurers were allowed capital volatility of 3% to 6% and were allowed to lose slightly more than a quarter of pre-Katrina consensus earnings before significant shareholder value deterioration occurred. Reinsurers on the other hand were allowed capital volatility of 12 to 19% and were allowed to lose an entire year of pre-Katrina consensus earnings before significant shareholder value deterioration occurred." The study reveals many more interesting facts surrounding the 2005 hurricane season and investor tolerances. Contact: Al Orendorff 312-381-3153 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. The company employs approximately 47,000 professionals in its 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. http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO http://photoarchive.ap.org/ DATASOURCE: Aon Corporation CONTACT: Al Orendorff of Aon Corporation, +1-312-381-3153 Web site: http://www.aon.com/

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