AOC Aon Corp.

CHICAGO, Oct. 10 /PRNewswire-FirstCall/ -- Increases in homeowners insurance rates have not been sufficient thus far to provide an adequate return on equity on homeowners insurance, making further increases necessary, according to an analysis by Aon Re, the world's largest reinsurance broker. (Logo: http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO ) With capital requirements and the cost of catastrophe reinsurance up year over year, especially in states most at risk for hurricanes, Aon Re's analysis of prospective return on equity for the homeowners insurance line is 5.7 percent. A similar analysis in 2005 revealed a 9.3 percent return on equity in 2005. Many insurers seek a return of 14 percent or more. Aon Re's findings are highlighted in its 2006 Homeowners Return on Equity Outlook. "Homeowners insurers are in a challenging position. Rating agencies are taking an even-closer look at catastrophe risk as they assess insurers' capital adequacy, meteorologists and risk modeling firms expect more and stronger hurricanes at least in the near term, and the increases in homeowners insurance rates that we've seen thus far aren't enough to provide insurers the opportunity to earn back their cost of capital," said Bryon G. Ehrhart, president and chief executive officer of Aon Re Services, Inc. "Homeowners insurers must keep more capital on hand to meet industry standards than was necessary only a year ago. As a result, we at Aon Re are helping our clients to understand the new capital requirements and needed rate actions." Aon Re's prospective return on equity is 3.5 percent for hurricane- affected states viewed as a group, 8.1 percent for the non-hurricane-affected states. To reach a prospective return on equity of 14 percent, an estimated average rate increase of 43.3 percent would be required for the hurricane- affected states, 11.1 percent for the non-hurricane-affected states. "The needed rate increase for hurricane states is likely to be large, not only because of the changing views of expected losses due to hurricanes, but also because of the amount of capital that is necessary to operate in those states, which is linked to their risk of catastrophic loss," said Randall E. Brubaker, senior vice president of Aon Re Services, Inc. Prospective returns on equity at current rates and rate increases for 14 percent return on equity are based on analysis of actuarial support for rate filings of the five leading companies in states making up 80 percent of the U.S. population, where this information is publicly available. Estimates reflect rate increases filed by these largest insurers through July 2006. Smaller states were estimated using combined ROE of reviewed states, credibility adjusted based on state loss-ratio data reported in annual statements. Estimates are based on an Aon Re analysis updated in 2006 of capital requirements and cost of reinsurance by state for a company with an A.M. Best "A" rating. Prospective profit and needed rate increases for actual companies will vary and should be based on individual company analysis About Aon Aon Corporation (NYSE:AOC) 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. http://www.aon.com/ For more information, contact: Rahsaan Johnson, 312.381.2684, 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, our ability to consummate the pending sale of the Aon Warranty Group, 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: Rahsaan Johnson, Aon Corporation, +1-312-381-2684, or Web site: http://www.aon.com/

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