AOC Aon Corp.

-- Total Revenue Increased 7% to $2.2 Billion -- CHICAGO, Nov. 1 /PRNewswire-FirstCall/ -- Aon Corporation (NYSE:AOC) today reported results for the third quarter and nine months ended September 30, 2006. Third quarter net income was $106 million or $0.32 per share, compared to $122 million or $0.36 per share for the prior year quarter. Net income from continuing operations was $90 million or $0.27 per share, compared to $97 million or $0.29 per share for the prior year quarter. Certain items that influenced third quarter results and comparisons against the prior year quarter are detailed in the reconciliations of the impact of non-GAAP measures on pages 14 and 15. Net income from continuing operations, excluding certain items, increased 33% to $0.44 per share compared to $0.33 per share for the prior year quarter. Total revenue increased 7% to $2.2 billion with organic revenue growth of 6%. Risk and Insurance Brokerage Services revenue increased 5% to $1.3 billion and organic revenue growth was 3%. Reinsurance organic revenue growth was 8%. Consulting revenue increased 2% to $301 million with organic revenue growth of 3%. Insurance Underwriting revenue increased to $519 million with organic revenue growth of 13% for Accident & Health and Life (A&H and Life). "The third quarter is evidence of good progress in each of our three key metrics: earnings growth, margin expansion and organic revenue growth," said Greg Case, Aon president and chief executive officer. "Adjusted pretax income increased by 33% with meaningfully higher margins in both Brokerage and Consulting. Investments we have made for our future, coupled with our commitment to distinctive client value, produced consolidated organic revenue growth of 6%, the highest rate of growth since 2003." THIRD QUARTER SEGMENT REVIEW Certain noteworthy items impacted revenue, pretax income and pretax margins in 2005 and 2006. 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 Non-GAAP Measures - Segments" on page 15 of this press release. RISK AND INSURANCE BROKERAGE SERVICES Less: (millions) Acquis- Third Quarter Ended Less: itions, ------------------- Curr- Divest- Less: Organic Sept. 30, Sept. 30, % ency itures, All Revenue Revenue 2006 2005 Change Impact Transfers Other Growth ------- --------- -------- ------ ------ --------- ----- ------- Americas $567 $538 5% 1% 2% - % 2% International 536 527 2 2 3 (4) 1 Reinsurance 238 209 14 2 (2) 6 8 --------- -------- ------ ------ --------- ----- ------- Total $1,341 $1,274 5% 2% 2% (2)% 3% ========= ======== ====== ====== ========= ===== ======= Risk and Insurance Brokerage Services third quarter revenue increased 5% to $1.3 billion with organic revenue growth of 3%. Brokerage-Americas organic revenue increased 2% with strong growth in Affinity and Latin America. Brokerage-International organic revenue increased 1% with strong results in Asia, partially offset by weakness in the U.K. In 2005, Brokerage- International reported revenue included $23 million attributable to a refinement in techniques used to estimate revenues on installment policies in the U.K., which has been excluded from the calculation of organic revenue growth. Reinsurance organic revenue increased 8% primarily driven by new business and increased penetration with existing clients in the U.S. and the U.K. Third Quarter Ended ----------------------- (millions) Sept. 30, Sept. 30, % 2006 2005 Change --------- --------- ------ Revenue $1,341 $1,274 5% Expenses Compensation and benefits 814 750 9 Other expenses 337 388 (13) --------- --------- ------ Total expenses 1,151 1,138 1 --------- --------- ------ Pretax income $190 $136 40% ========= ========= ====== Pretax margin 14.2% 10.7% Pretax income - adjusted $189 $146 29% Pretax margin - adjusted 14.1% 11.7% Compensation and benefits increased 9% versus the prior year quarter primarily due to currency fluctuations, higher merit-based incentives and employee benefit costs. Other expenses declined 13% primarily due to a $30 million gain on the sale of a building in Spain and lower information technology expenses. The prior year quarter included a non-cash charge of $22 million to recognize the costs of future claims servicing in the U.K. brokerage operation. Third quarter pretax income increased 40% to $190 million and the pretax margin increased 350 basis points to 14.2% versus the prior year. Adjusting for certain items detailed on page 15, pretax income increased 29% to $189 million and the pretax margin increased 240 basis points to 14.1% versus the prior year quarter, principally due to revenue growth and the benefits of operational improvements and cost reduction initiatives. CONSULTING Less: (millions) Acquis- Third Quarter Ended Less: itions, ------------------- Curr- Divest- Less: Organic Sept. 30, Sept. 30, % ency itures, All Revenue Revenue 2006 2005 Change Impact Transfers Other Growth ------- --------- -------- ------ ------ --------- ----- ------- Services $234 $230 2% 2% (4)% - % 4% Outsourcing 67 65 3 2 2 1 (2) --------- -------- ------ ------ --------- ----- ------- Total $301 $295 2% 2% (2)% (1)% 3% ========= ======== ====== ====== ========= ===== ======= Consulting third quarter revenue increased 2% to $301 million with organic revenue growth of 3%. Organic revenue in Consulting Services increased 4%, driven primarily by the recently established Financial Advisory and Litigation Consulting (FALC) unit and international operations. Third Quarter Ended ------------------------- (millions) Sept. 30, Sept. 30, % 2006 2005 Change ---------- ---------- -------- Revenue $301 $295 2% Expenses Compensation and benefits 198 188 5 Other expenses 85 92 (8) ---------- ---------- -------- Total expenses 283 280 1 ---------- ---------- -------- Pretax income $18 $15 20% ========== ========== ======== Pretax margin 6.0% 5.1% Pretax income - adjusted $24 $17 41% Pretax margin - adjusted 8.0% 5.8% Compensation and benefits expense increased 5% versus the prior year quarter primarily due to investments made in new practices including FALC. Other expenses declined 8% versus the prior year quarter due primarily to lower information technology expenses. Third quarter pretax income increased 20% to $18 million and the pretax margin increased 90 basis points to 6.0% versus the prior year quarter. Adjusting for certain items detailed on page 15, pretax income increased 41% to $24 million and the pretax margin increased 220 basis points to 8.0% versus the prior year quarter due primarily to broad-based improvements in all businesses, partially offset by investments in FALC and new global benefits services. INSURANCE UNDERWRITING Less: (millions) Acquis- Third Quarter Ended Less: itions, ------------------- Curr- Divest- Less: Organic Sept. 30, Sept. 30, % ency itures, All Revenue Revenue 2006 2005 Change Impact Transfers Other Growth ------- --------- -------- ------ ------ --------- ----- ------- Accident & Health and Life $511 $453 13% 2% -% (2)% 13% Property & Casualty 8 11 (27) N/A N/A N/A N/A --------- -------- ------ ------ --------- ----- ------- Total $519 $464 12% 2% -% (10)% 20% ========= ======== ====== ====== ========= ===== ======= Insurance Underwriting revenue increased to $519 million. A&H and Life organic revenue, which is based on written premiums and fees, increased 13% driven primarily by strong growth in a supplemental health product. Due to pending dispositions, Aon Warranty Group and Construction Program Group have been placed into discontinued operations. All remaining Property & Casualty (P&C) business has been placed in run-off. As organic growth calculations are based on written premium, organic growth comparisons are not meaningful. Third Quarter Ended -------------------------- (millions) Sept. 30, Sept. 30, % 2006 2005 Change ----------- ---------- -------- Revenue $519 $464 12% Expenses Benefits to policyholders 349 240 45 Compensation and benefits 94 88 7 Other expenses 103 84 23 ----------- ---------- -------- Total expenses 546 412 33 ----------- ---------- -------- Pretax income (loss) $(27) $52 N/A% =========== ========== ======== Pretax margin (5.2)% 11.2% Pretax income - adjusted $55 $52 6% Pretax margin - adjusted 10.6% 11.2% Benefits to policyholders increased 45% versus the prior year quarter reflecting the previously announced strengthening of P&C reserves by $81 million in the third quarter. The third quarter pretax loss was $27 million due primarily to the P&C reserve increase. Adjusting for certain items detailed on page 15, pretax income increased 6% to $55 million and the pretax margin decreased 60 basis points to 10.6% versus the prior year. CORPORATE AND OTHER Third Quarter Ended -------------------------- (millions) Sept. 30, Sept. 30, % 2006 2005 Change ---------- ---------- -------- Revenue $19 $(3) N/A% Expenses Compensation and benefits 10 7 43 Other general expenses 17 20 (15) Interest expense 34 29 17 ---------- ---------- -------- Total expenses 61 56 9 ---------- ---------- -------- Pretax loss $(42) $(59) N/A% ========== ========== ======== Pretax loss - adjusted $(41) $(44) N/A% Corporate and Other revenue was $19 million, an increase of $22 million versus the prior year quarter. The prior year quarter included a $13 million pretax loss related to the revaluation of Endurance warrants. Interest expense increased 17% to $34 million versus the prior year quarter due to increased borrowings and higher interest rates. Corporate and Other pretax loss was $42 million versus a pretax loss of $59 million in the prior year quarter. Sale of Aon Warranty Group and Construction Program Group Subsequent to the close of the quarter, Aon signed a letter of intent to sell its Construction Program Group (CPG) business, a managing general underwriter, to Old Republic Insurance Company. The operating results of this business have been reclassified to discontinued operations for the third quarter and nine months ended September 30, 2006 and 2005. As previously announced, the operating results of Aon Warranty Group (AWG) and its worldwide operations, including Virginia Surety Company (VSC), and related Corporate and Other segment investment income, are also included in discontinued operations (see "Discontinued Operations"). The sale of CPG and the previously announced pending sale of AWG and VSC are anticipated to be completed in the fourth quarter of 2006. Property & Casualty Reserves P&C reserves have been increased by $102 million reflecting adverse development, refined assumptions, and additional claim information relating to programs to be disposed of through sale or run-off. The majority of the reserve increase is attributable to National Program Services. Of the reserve increase, $81 million ($0.15 per share) was recorded in continuing operations and $21 million ($0.04 per share) relating to CPG, was recorded in discontinued operations. All remaining P&C programs have been placed in run- off, and the Company continues to explore alternative disposition opportunities for portions of the book. Discontinued Operations Third quarter after-tax income from discontinued operations, which includes AWG and CPG, was $16 million or $0.05 per share, compared to $25 million or $0.07 per share in the prior year quarter. Selected financial information relating to the reclassification of CPG is included on page 17. Restructuring Plan The previously announced three-year restructuring plan is expected to result in cumulative pretax charges of approximately $300 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 $210 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. Aon currently expects to finalize the plan by the end of 2006. An analysis of restructuring-related expenses by segment for the third quarter and nine months of 2006 is presented in the attached reconciliation of non-GAAP measures. Actual and estimated restructuring costs by reporting period, by type, and by geographic region are detailed on page 16. Restructuring benefits realized in the third quarter and nine months of 2006 are estimated at $35 million and $82 million, respectively. FASB Statement No. 123(R) As of January 1, 2006, Aon adopted FASB Statement No.123(R) using the modified prospective transition method. Accordingly, prior period amounts have not been restated. Stock option-based compensation expense (included in compensation and benefits expense) related to the adoption of Statement No.123(R) was $6 million or $0.01 per share in the third quarter of 2006, and $19 million or $0.04 per share for nine months 2006. Foreign Exchange Impact Third quarter net income per share was negatively impacted by $0.01 related to foreign currency translation losses relative to the prior year quarter. In addition, third quarter net income per share included $0.01 of currency hedging losses compared to $0.02 of hedging gains in the prior year quarter. Effective Tax Rate The effective tax rate for continuing operations was 35.3% for the third quarter, compared to 32.6% for the prior year quarter. The effective tax rate for 2005 was lower reflecting the favorable resolution of certain tax matters. Stock Repurchase Program During the third quarter, Aon completed the repurchase of approximately 5.6 million shares of common stock for $190 million at an average price of approximately $33.82. Through September 30, 2006, the Company repurchased approximately 18 million shares for $683 million under the existing $1 billion buyback authorization announced in November 2005. Pension - FAS158 and Proposed Changes to U.S. and U.K. Plans FASB Statement No. 158 (FAS 158) requires balance sheet recognition of the funded status of defined benefit postretirement plans, including pension plans. FAS 158 also requires companies to measure plan assets and obligations as of the date of the year end financial statements. If Aon had adopted FAS 158 as of December 31, 2005, the total impact from the Company's material pension plans would have been to reduce stockholders' equity by approximately $500 million. Changes to plan assumptions will impact this amount. Aon is adopting FAS 158 and changing the measurement date of its U.S. and U.K. pension plans to December 31 effective at year end 2006. Subsequent to the close of the quarter, Aon proposed to change its U.S. and U.K. defined benefit pension plans to maintain competitive retirement benefits for its employees while reducing future pension costs. These proposed changes are expected to result in annual expense savings of approximately $60 million. Actual 2007 pension expense will depend upon a number of measurement date factors which are used to calculate pension cost, including interest rates, foreign exchange rates, asset levels, asset return expectations and mortality assumptions, as well as the timing of implementation of proposed changes to the U.K. plans. Financial Condition Total debt and total debt as a percentage of capital was $2.3 billion and 30%, respectively, at September 30, 2006, compared to $2.1 billion and 28% at December 31, 2005, and $1.9 billion and 26% at September 30, 2005. Stockholders' equity was $5.4 billion at September 30, 2006. Approximately 93% of Aon's investment portfolio at quarter end was in short-term and fixed maturities, with 99% of the fixed income securities rated investment grade. Conference Call and Webcast Details The Company will host a conference call on Thursday, November 2 at 10:00 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 ( 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 45,000 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, our ability to consummate the pending sale of the Aon Warranty Group, our ability to obtain regulatory or legislative changes to permit continuous sales of our supplemental Medicare health product, 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, although they may not make identical adjustments. Investor Contact: Scott Malchow Vice-President, Investor Relations 312-381-3983 Media Contact: Al Orendorff Director, Public Relations 312-381-3153 Aon Corporation Consolidated Summary of Operations Third Quarter Ended Nine Months Ended --------------------------- --------------------------- (millions except Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent per share data) 2006 2005(1) Change 2006 2005(1) Change --------- --------- ------- --------- --------- ------- Revenue Brokerage commissions and fees $1,589 $1,527 4 % $4,852 $4,756 2 % Premiums and other 487 436 12 1,423 1,307 9 Investment income 92 55 67 266 186 43 --------- --------- ------- --------- --------- ------- Total revenue 2,168 2,018 7 6,541 6,249 5 --------- --------- ------- --------- --------- ------- Expenses Compensation and benefits 1,116 1,033 8 3,344 3,194 5 Other general expenses 474 494 (4) 1,394 1,382 1 Benefits to policyholders 349 240 45 864 708 22 Depreciation and amortization 56 77 (27) 166 198 (16) Interest expense 34 29 17 99 94 5 Provision for New York and other state settlements - 1 (100) 2 4 (50) --------- --------- ------- --------- --------- ------- Total expenses 2,029 1,874 8 5,869 5,580 5 --------- --------- ------- --------- --------- ------- Income from continuing operations before provision for income tax 139 144 (3) 672 669 - Provision for income tax(3) 49 47 4 234 201 16 --------- --------- ------- --------- --------- ------ Income from continuing operations 90 97 (7) 438 468 (6) Discontinued Operations Income from discontinued operations 24 39 (38) 92 116 (21) Provision for income tax(4) 8 14 (43) 34 71 (52) --------- --------- ------- --------- --------- ------ Income from discontinued operations 16 25 (36) 58 45 29 --------- --------- ------- --------- --------- ------ Income before accounting change 106 122 (13) 496 513 (3) Cumulative effect of change in accounting principle, net of tax (2) - - N/A 1 - N/A --------- --------- ------- --------- --------- ------ Net income $106 $122 (13)% $497 $513 (3)% ========= ========= ======= ========= ========= ====== Preferred stock dividends - (1) (100) - (2) (100) --------- --------- ------- --------- --------- ------ Net income available for common stockholders $106 $121 (12)% $497 $511 (3)% ========= ========= ======= ========= ========= ====== Basic net income per share: Income from continuing operations $0.29 $0.29 -% $1.37 $1.45 (6)% Discontinued operations 0.05 0.08 (38) 0.18 0.14 29 Cumulative effect of change in accounting principle - - N/A - - N/A --------- --------- -------- -------- --------- ------ Net income $0.34 $0.37 (8)% $1.55 $1.59 (3)% ========= ========= ======== ======== ========= ====== Diluted net income per share: Income from continuing operations $0.27 $0.29 (7)% $1.29 $1.39 (7)% Discontinued operations 0.05 0.07 (29) 0.17 0.13 31 Cumulative effect of change in accounting principle - - N/A - - N/A --------- --------- -------- -------- --------- ------ Net income $0.32 $0.36 (11)% $1.46 $1.52 (4)% ========= ========= ======== ======== ========= ====== Diluted average common and common equivalent shares outstanding 340.1 342.7 345.0 339.4 ========= ========= ======== ========= (1) Certain amounts relating to discontinued operations have been reclassified to conform to the 2006 presentation. (2) Adoption of FASB Statement No. 123(R), "Share-Based Payments," effective January 1, 2006. (3) Tax rate from continuing operations is 35.3% and 32.6% for the third quarters ended September 30, 2006 and 2005, respectively, and 34.8% and 30.0% for the nine month periods ended September 30, 2006 and 2005, respectively. (4) Tax rate from discontinued operations is 33.3% and 35.9% for the third quarters ended September 30, 2006 and 2005, respectively, and 37.0% and 61.2% for the nine month periods ended September 30, 2006 and 2005, respectively. Aon Corporation Revenue from Continuing Operations Third Quarter Ended -------------------------------------------------------- Less: Acquis- itions, Less: Divest- Less: Organic Curr- itures All Revenue Sept. 30, Sept. 30, Percent ency & Other Growth (millions) 2006 2005(1) Change Impact Transfers (2) (3) --------- --------- ------- ------ --------- ---- ------ Revenue Risk and insurance brokerage services Risk management and insurance brokerage - Americas $567 $538 5% 1% 2% -% 2% Risk management and insurance brokerage - International 536 527 2 2 3 (4) 1 Reinsurance brokerage and related services 238 209 14 2 (2) 6 8 --------- --------- ------- ------ --------- ---- ------ Total risk and insurance brokerage services 1,341 1,274 5 2 2 (2) 3 --------- --------- ------- ------ --------- ---- ------ Consulting Consulting services 234 230 2 2 (4) - 4 Outsourcing 67 65 3 2 2 1 (2) ---------- -------- ------- ------ --------- ---- ------ Total consulting 301 295 2 2 (2) (1) 3 ---------- -------- ------- ------ --------- ---- ------ Insurance underwriting Accident & health and life 511 453 13 2 - (2) 13 Property & casualty 8 11 (27) N/A N/A N/A N/A ---------- -------- ------- ------ -------- ---- ------ Total insurance underwriting 519 464 12 2 - (10) 20 ---------- -------- ------- ------ -------- ---- ------ Corporate and other 19 (3) N/A N/A N/A N/A N/A Intersegment revenues (12) (12) N/A N/A N/A N/A N/A ---------- -------- ------- ------ -------- ---- ------ Total $2,168 $2,018 7 % 2% 1% (2)% 6% ========= ======== ======= ====== ======== ==== ====== Nine Months Ended -------------------------------------------------------- Less: Acquis- itions, Less: Divest- Less: Organic Curr- itures All Revenue Sept. 30, Sept. 30, Percent ency & Other Growth (millions) 2006 2005(1) Change Impact Transfers (2) (3) --------- --------- ------- ------ --------- ---- ------ Revenue Risk and insurance brokerage services Risk management and insurance brokerage - Americas $1,665 $1,514 10% 1% 2% 4% 3% Risk management and insurance brokerage - International 1,743 1,779 (2) (2) 1 (1) - Reinsurance brokerage and related services 698 652 7 (1) - 4 4 ---------- -------- ------- ------ --------- ---- ------ Total risk and insurance brokerage services 4,106 3,945 4 (1) 2 1 2 ---------- -------- ------- ------ --------- ---- ------ Consulting Consulting services 709 714 (1) - (4) - 3 Outsourcing 209 205 2 - 2 - - ---------- -------- ------- ------ --------- ---- ------ Total consulting 918 919 - - (2) - 2 ---------- -------- ------- ------ --------- ---- ------ Insurance underwriting Accident & health and life 1,491 1,343 11 - - (1) 12 Property & casualty 28 49 (43) N/A N/A N/A N/A ---------- -------- ------- ------ --------- ---- ------ Total insurance underwriting 1,519 1,392 9 - - (4) 13 ---------- -------- ------- ------ --------- ---- ------ Corporate and other 34 27 26 N/A N/A N/A N/A Intersegment revenues (36) (34) N/A N/A N/A N/A N/A ---------- -------- ------- ------- -------- ---- ------ Total $6,541 $6,249 5% - % 1% (1)% 5% ========== ======== ======= ======= ======== ==== ====== (1) Certain amounts relating to discontinued operations have been reclassified to conform to the 2006 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 Risk and Insurance Brokerage Services - Continuing Operations Third Quarter Ended Nine Months Ended --------------------------- --------------------------- Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent (millions) 2006 2005(1) Change 2006 2005(1) Change --------- --------- ------- --------- --------- ------- Revenue Operating and other revenue $1,294 $1,240 4% $3,954 $3,858 2% Investment income 47 34 38 152 87 75 --------- --------- ------- --------- --------- ------- Total revenue 1,341 1,274 5 4,106 3,945 4 --------- --------- ------- --------- --------- ------- Expenses Compensation and benefits 814 750 9 2,435 2,316 5 Other expenses 337 388 (13) 1,026 1,052 (2) --------- --------- ------- --------- --------- ------- Total expenses 1,151 1,138 1 3,461 3,368 3 --------- --------- ------- --------- --------- ------- Income from continuing operations before provision for income tax $190 $136 40% $645 $577 12% ========= ========= ======= ========= ========= ======= Pretax margin - income from continuing operations before provision for income tax 14.2% 10.7% 15.7% 14.6% Consulting - Continuing Operations Third Quarter Ended Nine Months Ended --------------------------- --------------------------- Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent (millions) 2006 2005(1) Change 2006 2005(1) Change --------- --------- ------- --------- --------- ------- Revenue Operating and other revenue $300 $294 2% $914 $916 -% Investment income 1 1 - 4 3 33 --------- --------- ------- --------- --------- ------- Total revenue 301 295 2 918 919 - --------- --------- ------- --------- --------- ------- Expenses Compensation and benefits 198 188 5 594 583 2 Other expenses 85 92 (8) 253 266 (5) --------- --------- ------- --------- --------- ------- Total expenses 283 280 1 847 849 - --------- --------- ------- --------- --------- ------- Income from continuing operations before provision for income tax $18 $15 20% $71 $70 1% ========= ========= ======= ========= ========= ======= Pretax margin - income from continuing operations before provision for income tax 6.0% 5.1% 7.7% 7.6% (1) Certain amounts relating to discontinued operations have been reclassified to conform to the 2006 presentation. Aon Corporation Insurance Underwriting - Continuing Operations Third Quarter Ended Nine Months Ended --------------------------- --------------------------- Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent (millions) 2006 2005(1) Change 2006 2005(1) Change --------- --------- ------- --------- --------- ------- Revenue Premiums and other $494 $441 12% $1,443 $1,323 9% Investment income 25 23 9 76 69 10 --------- --------- ------- --------- --------- ------- Total revenue 519 464 12 1,519 1,392 9 --------- --------- ------- --------- --------- ------- Expenses Benefits to policyholders 349 240 45 864 708 22 Compensation and benefits 94 88 7 286 272 5 Other expenses 103 84 23 268 251 7 --------- --------- ------- --------- --------- ------- Total expenses 546 412 33 1,418 1,231 15 --------- --------- ------- --------- --------- ------- Income from continuing operations before provision for income tax $(27) $52 N/A% $101 $161 (37)% ========= ========= ======= ========= ========= ======= Pretax margin - income from continuing operations before provision for income tax -5.2% 11.2% 6.6% 11.6% Corporate and Other - Continuing Operations Third Quarter Ended Nine Months Ended --------------------------- --------------------------- Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent (millions) 2006 2005(1) Change 2006 2005(1) Change --------- --------- ------- --------- --------- ------- Revenue Income from marketable equity securities and other investments (2) $22 $2 +500% $42 $40 5% Limited partnership investments 1 - N/A 2 1 100 Net loss on disposals and related expenses (4) (5) N/A (10) (14) N/A --------- --------- ------- --------- --------- ------- Total revenue 19 (3) N/A 34 27 26 --------- --------- ------- --------- --------- ------- Expenses Compensation and benefits 10 7 43 29 23 26 Other general expenses 17 20 (15) 51 49 4 Interest expense 34 29 17 99 94 5 --------- --------- ------- --------- --------- ------- Total expenses 61 56 9 179 166 8 --------- --------- ------- --------- --------- ------- Loss from continuing operations before provision for income tax $(42) $(59) N/A% $(145) $(139) N/A% ========= ========= ======= ========= ========= ======= (1) Certain amounts related to discontinued operations have been reclassified to conform to the 2006 presentation. (2) Includes gain (loss) from Endurance warrants of ($17) million for the nine months ended September 30, 2006 and ($13) million and $2 million for the third quarter and nine months ended September 30, 2005, respectively. Aon Corporation Reconciliation of the Impact of Non-GAAP Measures on Diluted Earnings Per Share Third Quarter and Nine Months Ended September 30, 2006 and 2005 Third Quarter Ended Nine Months Ended --------------------------- --------------------------- Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent 2006 2005 Change 2006 2005 Change --------- --------- ------- --------- --------- ------- Diluted earnings per share from continuing operations - as reported $0.27 $0.29 (7)% $1.29 $1.39 (7)% After tax earnings per share adjustments: Restructuring charges 0.06 0.07 0.15 0.07 Contingent commissions - (0.02) (0.03) (0.05) Stock option expense 0.01 - 0.04 - Hedging (gains) losses 0.01 (0.02) 0.02 (0.07) Favorable resolution of tax contingencies and deferred tax adjustments - (0.02) - (0.12) Gain on sale of Cambridge preferred stock investment - - (0.07) - Property & Casualty reserve adjustments 0.15 - 0.15 - Gain on sale of building in Spain (0.06) - (0.06) - UK installment revenue - (0.05) - (0.05) UK claims servicing - 0.05 - 0.05 Endurance warrants - 0.03 0.03 - --------- --------- --------- --------- Total after tax earnings per share adjustments 0.17 0.04 0.23 (0.17) --------- --------- --------- --------- Diluted earnings per share from continuing operations - as adjusted 0.44 0.33 33 1.52 1.22 25 Diluted earnings per share from discontinued operations - as reported 0.05 0.07 0.17 0.13 CPG reserve adjustment 0.04 - 0.04 - Deferred tax adjustments attributable to Aon Warranty Group - - - 0.09 ---------- -------- --------- --------- Diluted earnings per share from discontinued operations - as adjusted 0.09 0.07 29 0.21 0.22 (5) Total diluted earnings per share - as adjusted $0.53 $0.40 33% $1.73 $1.44 20% ========== ======== ========= ========= Diluted average common and common equivalent shares outstanding (millions) 340.1 342.7 345.0 339.4 ========== ======== ========= ========= Aon Corporation Reconciliation of Non-GAAP Measures - Segments Third Quarter and Nine Months Ended September 30, 2006 and 2005 (1) Third Quarter Ended September 30, 2006 ---------------------------------------------------- Risk and Insurance Brokerage Consult- Insurance Corporate (millions) Services ing Underwriting & Other Total ---------------------------------------------------- Revenue as reported $1,341 $301 $519 $7 $2,168 Gain on sale of Cambridge preferred stock investment - - - - - Contingent commissions (2) - - - (2) Endurance warrants - - - - - ---------------------------------------------------- Revenue as adjusted $1,339 $301 $519 $7 $2,166 ==================================================== Income (loss) from continuing operations before provision for income tax - as reported $190 $18 $(27) $(42) $139 Restructuring charges 23 5 - 1 29 Contingent commissions (2) - - - (2) Stock option expense 4 1 1 - 6 Hedging losses 4 - - - 4 Gain on sale of Cambridge preferred stock investment - - - - - Gain on sale of building in Spain (30) - - - (30) Property & Casualty reserve adjustments - - 81 - 81 Endurance warrants - - - - - ---------------------------------------------------- Income (loss) from continuing operations before provision for income tax - as adjusted $189 $24 $55 $(41) $227 ==================================================== Income from continuing operations before provision for income tax - margins as adjusted 14.1% 8.0% 10.6% N/A 10.5% ==================================================== Nine Months Ended September 30, 2006 ---------------------------------------------------- Risk and Insurance Brokerage Consult- Insurance Corporate (millions) Services ing Underwriting & Other Total ---------------------------------------------------- Revenue as reported $4,106 $918 $1,519 $(2) $6,541 Gain on sale of Cambridge preferred stock investment (35) - - - (35) Contingent commissions (15) - - - (15) Endurance warrants - - - 17 17 ---------------------------------------------------- Revenue as adjusted $4,056 $918 $1,519 $15 $6,508 ==================================================== Income (loss) from continuing operations before provision for income tax - as reported $645 $71 $101 $(145) $672 Restructuring charges 66 13 - 2 81 Contingent commissions (15) - - - (15) Stock option expense 13 3 3 - 19 Hedging losses 10 - - - 10 Gain on sale of Cambridge preferred stock investment (35) - - - (35) Gain on sale of building in Spain (30) - - - (30) Property & Casualty reserve adjustments - - 81 - 81 Endurance warrants - - - 17 17 ---------------------------------------------------- Income (loss) from continuing operations before provision for income tax - as adjusted $654 $87 $185 $(126) $800 ==================================================== Income from continuing operations before provision for income tax - margins as adjusted 16.1% 9.5% 12.2% N/A 12.3% ==================================================== Third Quarter Ended September 30, 2005 ---------------------------------------------------- Risk and Insurance Brokerage Consult- Insurance Corporate (millions) Services ing Underwriting & Other Total ---------------------------------------------------- Revenue as reported $1,274 $295 $464 $(15) $2,018 Contingent commissions (6) (2) - - (8) UK Installment revenue (23) - - - (23) Endurance warrants - - - 13 13 ---------------------------------------------------- Revenue as adjusted $1,245 $293 $464 $(2) $2,000 ==================================================== Income (loss) from continuing operations before provision for income tax - as reported $136 $15 $52 $(59) $144 Restructuring charges 29 4 - 2 35 Contingent commissions (6) (2) - - (8) Hedging gains (12) - - - (12) UK Installment revenue (23) - - - (23) UK Claims servicing 22 - - - 22 Endurance warrants - - - 13 13 ---------------------------------------------------- Income (loss) from continuing operations before provision for income tax - as adjusted $146 $17 $52 $(44) $171 ==================================================== Income from continuing operations before provision for income tax - margins as adjusted 11.7% 5.8% 11.2% N/A 8.6% ==================================================== (1) Certain noteworthy items impacted revenue and pretax income in 2006 and 2005, 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. Nine Months Ended September 30, 2005 ---------------------------------------------------- Risk and Insurance Brokerage Consult- Insurance Corporate (millions) Services ing Underwriting & Other Total ---------------------------------------------------- Revenue as reported $3,945 $919 $1,392 $(7) $6,249 Contingent commissions (22) (3) - - (25) UK Installment revenue (23) - - - (23) Endurance warrants - - - (2) (2) ---------------------------------------------------- Revenue as adjusted $3,900 $916 $1,392 $(9) $6,199 ==================================================== Income (loss) from continuing operations before provision for income tax - as reported $577 $70 $161 $(139) $669 Restructuring charges 29 4 - 2 35 Contingent commissions (22) (3) - - (25) Hedging gains (32) - - - (32) UK Installment revenue (23) - - - (23) UK Claims servicing 22 - - - 22 Endurance warrants - - - (2) (2) ---------------------------------------------------- Income (loss) from continuing operations before provision for income tax - as adjusted $551 $71 $161 $(139) $644 ==================================================== Income from continuing operations before provision for income tax - margins as adjusted 14.1% 7.8% 11.6% N/A 10.4% ==================================================== (1) Certain noteworthy items impacted revenue and pretax income in 2006 and 2005, 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 2005 Restructuring Plan By Type: Actual Estimated --------------------------------------------------------- Full First Second Third Total | Fourth Year Quarter Quarter Quarter Incurred| Quarter (millions) 2005 2006 2006 2006 to Date | 2006 2007 Total ---- ------- ------- ------- --------| ------- ---- ----- Workforce reduction $116 $25 $7 $10 $158| $20 $11 $189 Lease consolidation 20 5 7 12 44| 6 12 62 Asset impairments 17 1 1 3 22| 3 3 28 Other costs associated with restructuring 5 2 4 4 15| 2 4 21 -------------------------------------|------------------- Total restructuring and related expenses $158 $33 $19 $29 $239 $31 $30 $300 ========================================================= By Region: (millions) United United Continent Rest of States Kingdom of Europe World Total ------------------------------------------------- 2005 (incurred) $28 $92 $30 $8 $158 2006 (incurred -- 1st Qtr.) 12 13 5 3 33 2006 (incurred -- 2nd Qtr.) 3 15 - 1 19 2006 (incurred -- 3rd Qtr.) 18 14 (5) 2 29 ------------------------------------------------- Incurred to date 61 134 30 14 239 2006 - 4th quarter (estimated) 13 7 11 - 31 2007 (estimated) 19 4 7 - 30 ------------------------------------------------- Total incurred and remaining estimated $93 $145 $48 $14 $300 ================================================= Aon Corporation Construction Program Group 2005 ------------------------------------ 1st 2nd 3rd 4th Full (millions except per share data) Quarter Quarter Quarter Quarter Year ------- ---------------------------- Revenue Brokerage commissions and fees $3 $4 $3 $7 $17 Premiums and other 36 50 50 52 188 Investment income - from Risk & Insurance Brokerage Services segment - - - - - Investment income - from Insurance Underwriting segment 1 1 - 2 4 ------- ------- ------ ----- ----- Total revenue 40 55 53 61 209 ------- ------- ------ ----- ----- Expenses General expenses 14 14 16 15 59 Benefits to policyholders 21 31 32 12 96 ------- ------- ------ ----- ----- Total expenses 35 45 48 27 155 ------- ------- ------ ----- ----- Income (loss) before provision for income tax 5 10 5 34 54 Provision (benefit) for income tax 2 3 2 12 19 ------- ------- ------ ----- ----- Net income (loss) $3 $7 $3 $22 $35 ======= ======= ====== ===== ===== Basic net income (loss) per share $0.01 $0.03 $0.01 $0.07 $0.11 ======= ======= ====== ===== ===== Dilutive net income (loss) per share $- $0.02 $0.01 $0.06 $0.10 ======= ======= ====== ===== ===== Dilutive average common and common equivalent shares outstanding 337.1 338.5 342.7 347.5 341.5 ======= ======= ====== ===== ===== Aon Corporation Construction Program Group 2006 ---------------------------------- 1st 2nd 3rd Nine (millions except per share data) Quarter Quarter Quarter Months ---------------------------------- Revenue Brokerage commissions and fees $8 $6 $2 $16 Premiums and other 55 50 57 162 Investment income - from Risk & Insurance Brokerage Services segment 1 - - 1 Investment income - from Insurance Underwriting segment 1 1 2 4 -------- ------ ------- ------- Total revenue 65 57 61 183 -------- ------ ------- ------- Expenses General expenses 18 17 19 54 Benefits to policyholders 35 31 56 122 -------- ------ ------- ------- Total expenses 53 48 75 176 -------- ------ ------- ------- Income (loss) before provision for income tax 12 9 (14) 7 Provision (benefit) for income tax 4 3 (5) 2 -------- ------ ------- ------- Net income (loss) $8 $6 $(9) $5 ======== ====== ======= ======= Basic net income (loss) per share $0.02 $0.02 $(0.03) $0.02 ======== ====== ======= ======= Dilutive net income (loss) per share $0.02 $0.01 $(0.03) $0.01 ======== ====== ======= ======= Dilutive average common and common equivalent shares outstanding 350.2 344.8 340.1 345.0 ======== ====== ======= ======= Aon Corporation Consolidated Summary of Operations - Reclassified for Discontinued Operations 2005 --------------------------------------------- (millions except per share 1st 2nd 3rd 4th Full data) Quarter Quarter Quarter Quarter Year ------- ------------------------------------- Revenue Brokerage commissions and fees $1,623 $1,606 $1,527 $1,710 $6,466 Premiums and other 439 432 436 452 1,759 Investment income 76 55 55 85 271 ------- ------- ----------- ------- -------- Total revenue 2,138 2,093 2,018 2,247 8,496 ------- ------- ----------- ------- -------- Expenses General expenses 1,511 1,538 1,527 1,767 6,343 Benefits to policyholders 241 227 240 244 952 Depreciation & amortization 62 59 77 62 260 Interest expense 34 31 29 31 125 Provision for New York and other state settlements 1 2 1 1 5 ------- ------- ----------- ------- -------- Total expenses 1,849 1,857 1,874 2,105 7,685 ------- ------- ----------- ------- -------- Income from continuing operations before provision for income tax 289 236 144 142 811 Provision for income tax 104 50 47 40 241 ------- ------- ----------- ------- -------- Income from continuing operations 185 186 97 102 570 Discontinued Operations Income from discontinued operations 24 53 39 268 384 Provision for income tax 9 48 14 146 217 ------- ------- ----------- ------- -------- Income from discontinued operations 15 5 25 122 167 ------- ------- ----------- ------- -------- Income before accounting change 200 191 122 224 737 Cumulative effect of change in accounting principle, net of tax - - - - - ------- ------- ----------- ------- -------- Net income $200 $191 $122 $224 $737 ======= ======= =========== ======= ======== Preferred stock dividends (1) - (1) - (2) ------- ------- ----------- ------- -------- Net income available for common stockholders $199 $191 $121 $224 $735 ======= ======= =========== ======= ======== Basic net income per share: Income from continuing operations $0.57 $0.57 $0.29 $0.31 $1.76 Discontinued operations 0.05 0.02 0.08 0.38 0.52 Cumulative effect of change in accounting principle - - - - - ------- ------- ----------- ------- -------- Net income $0.62 $0.59 $0.37 $0.69 $2.28 ======= ======= =========== ======= ======== Dilutive net income per share: Income from continuing operations $0.55 $0.56 $0.29 $0.30 $1.68 Discontinued operations 0.04 0.01 0.07 0.35 0.49 Cumulative effect of change in accounting principle - - - - - ------- ------- ----------- ------- -------- Net income $0.59 $0.57 $0.36 $0.65 $2.17 ======= ======= =========== ======= ======== Dilutive average common and common equivalent shares outstanding 337.1 338.5 342.7 347.5 341.5 ======= ======= =========== ======= ======== Aon Corporation Consolidated Summary of Operations - Reclassified for Discontinued Operations 2006 ----------------------------------- 1st 2nd 3rd Nine (millions except per share data) Quarter Quarter Quarter Months ----------------------------------- Revenue Brokerage commissions and fees $1,612 $1,651 $1,589 $4,852 Premiums and other 464 472 487 1,423 Investment income 89 85 92 266 -------- ------- ------- ------- Total revenue 2,165 2,208 2,168 6,541 -------- ------- ------- ------- Expenses General expenses 1,558 1,590 1,590 4,738 Benefits to policyholders 254 261 349 864 Depreciation & amortization 55 55 56 166 Interest expense 31 34 34 99 Provision for New York and other state settlements 1 1 - 2 -------- ------- ------- ------- Total expenses 1,899 1,941 2,029 5,869 -------- ------- ------- ------- Income from continuing operations before provision for income tax 266 267 139 672 Provision for income tax 93 92 49 234 -------- ------- ------- ------- Income from continuing operations 173 175 90 438 Discontinued Operations Income from discontinued operations 39 29 24 92 Provision for income tax 15 11 8 34 -------- ------- ------- ------- Income from discontinued operations 24 18 16 58 -------- ------- ------- ------- Income before accounting change 197 193 106 496 Cumulative effect of change in accounting principle, net of tax 1 - - 1 -------- ------- ------- ------- Net income $198 $193 $106 $497 ======== ======= ======= ======= Preferred stock dividends - - - - -------- ------- ------- ------- Net income available for common stockholders $198 $193 $106 $497 ======== ======= ======= ======= Basic net income per share: Income from continuing operations $0.54 $0.54 $0.29 $1.37 Discontinued operations 0.07 0.06 0.05 0.18 Cumulative effect of change in accounting principle - - - - -------- ------- ------- ------- Net income $0.61 $0.60 $0.34 $1.55 ======== ======= ======= ======= Dilutive net income per share: Income from continuing operations $0.50 $0.52 $0.27 $1.29 Discontinued operations 0.07 0.05 0.05 0.17 Cumulative effect of change in accounting principle - - - - -------- ------- ------- ------- Net income $0.57 $0.57 $0.32 $1.46 ======== ======= ======= ======= Dilutive average common and common equivalent shares outstanding 350.2 344.8 340.1 345.0 ======== ======= ======= ======= Aon Corporation Segments - Reclassification for Discontinued Operations 2005 2006 -------------------------------------- ----------------------- (millions) 1st 2nd 3rd 4th Full 1st 2nd Six Quarter Quarter Quarter Quarter Year Quarter Quarter Months ------- ------- ------- ------- ------ ------- ------- ------ Revenue Risk and insurance brokerage services: As reported $1,352 $1,334 $1,280 $1,434 $5,400 $1,393 $1,395 $2,788 Less: reclass- ification to discon- tinued operations (7) (8) (6) (12) (33) (13) (10) (23) ------- ------- ------- ------- ------ ------- ------- ------ As reclass- ified 1,345 1,326 1,274 1,422 5,367 1,380 1,385 2,765 Consulting 309 315 295 336 1,255 308 309 617 Insurance underwriting : As reported 505 511 514 537 2,067 551 556 1,107 Less: reclassification to discontinued operations (37) (51) (50) (54) (192) (56) (51) (107) ------- ------- ------- ------- ------ ------- ------- ------ As reclassi- fied 468 460 464 483 1,875 495 505 1,000 Corporate and Other 27 3 (3) 18 45 (3) 18 15 Intersegment revenues As reported (15) (15) (15) (17) (62) (19) (13) (32) Less: reclassification to discontinued operations 4 4 3 5 16 4 4 8 ------- ------- ------- ------- ------ ------- ------- ------ As reclass- ified (11) (11) (12) (12) (46) (15) (9) (24) ------- ------- ------- ------- ------ ------- ------- ------ Total $2,138 $2,093 $2,018 $2,247 $8,496 $2,165 $2,208 $4,373 ======= ======= ======= ======= ====== ======= ======= ====== Income (loss) before income tax Risk and insurance brokerage services: As reported $240 $208 $137 $134 $719 $249 $220 $469 Less: reclass- ification to discontinued operations (3) (4) (1) (7) (15) (9) (5) (14) ------- ------- ------- ------- ------ ------- ------- ------ As reclass- ified 237 204 136 127 704 240 215 455 Consulting 26 29 15 40 110 30 23 53 Insurance underwriting: As reported 54 63 56 52 225 56 79 135 Less: reclassification to discontinued operations (2) (6) (4) (27) (39) (3) (4) (7) ------- ------- ------- ------- ------ ------- ------- ------ As reclassified 52 57 52 25 186 53 75 128 Corporate and Other (26) (54) (59) (50) (189) (57) (46) (103) ------- ------- ------- ------- ------ ------- ------- ------ Total $289 $236 $144 $142 $811 $266 $267 $533 ======= ======= ======= ======= ====== ======= ======= ====== Income from continuing operations before income tax - margins Risk and insurance brokerage services: As reported 17.8% 15.6% 10.7% 9.3% 13.3% 17.9% 15.8% 16.8% As reclass- ified 17.6% 15.4% 10.7% 8.9% 13.1% 17.4% 15.5% 16.5% Consulting 8.4% 9.2% 5.1% 11.9% 8.8% 9.7% 7.4% 8.6% Insurance underwriting As reported 10.7% 12.3% 10.9% 9.7% 10.9% 10.2% 14.2% 12.2% As reclass- ified 11.1% 12.4% 11.2% 5.2% 9.9% 10.7% 14.9% 12.8% Total As reported 13.5% 11.5% 7.2% 7.6% 9.9% 12.5% 12.2% 12.3% As reclass- ified 13.5% 11.3% 7.1% 6.3% 9.5% 12.3% 12.1% 12.2% Aon Corporation Preliminary Condensed Consolidated Statements of Financial Position As of ----------------------------- Dec. 31, (billions) Sept. 30, 2006 2005 ----------------- --------- (Unaudited) ASSETS Investments Fixed maturities at fair value $3.0 $2.6 Short-term investments 3.6 3.9 Other investments 0.5 0.5 ----------------- --------- Total investments 7.1 7.0 Cash 0.5 0.5 Receivables 8.9 9.1 Deferred Policy Acquisition Costs 0.5 0.5 Goodwill 4.4 4.2 Other Intangible Assets 0.1 0.1 Property and Equipment, net 0.5 0.5 Assets Held for Sale 4.6 4.2 Other Assets 2.0 1.7 ----------------- --------- TOTAL ASSETS $28.6 $27.8 ================= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Insurance Premiums Payable $9.3 $9.4 Policy Liabilities Future policy benefits 1.8 1.7 Policy and contract claims 1.5 1.5 Unearned and advance premiums and contract fees and other 0.4 0.2 ----------------- --------- Total Policy Liabilities 3.7 3.4 General Liabilities General expenses 1.5 1.6 Notes payable and short-term borrowings 2.3 2.1 Pension, post-employment and post-retirement liabilities 1.7 1.5 Liabilities held for sale 4.0 3.6 Other liabilities 0.7 0.9 ----------------- --------- TOTAL LIABILITIES 23.2 22.5 Stockholders' Equity 5.4 5.3 ----------------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28.6 $27.8 ================= ========= DATASOURCE: Aon Corporation CONTACT: Investor Contact, Scott Malchow, Vice-President, Investor Relations, +1-312-381-3983, or Media Contact, Al Orendorff, Director, Public Relations, +1-312-381-3153, both of Aon Corporation Web site: http://www.aon.com/

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