AOC Aon Corp.

-- Revenue grew 10% to $2.4 billion with organic revenue growth of 5% -- CHICAGO, May 3 /PRNewswire-FirstCall/ -- Aon Corporation (NYSE:AOC) today reported results for the first quarter ended March 31, 2007. Net income increased 8% to $213 million or $0.66 per share, compared to $198 million or $0.57 per share for the prior year quarter. Net income from continuing operations increased 23% to $212 million or $0.66 per share, compared to $173 million or $0.50 per share for the prior year quarter. Certain items that impacted first quarter results and comparisons with the prior year quarter are detailed in the reconciliations of non-GAAP measures on pages 12 and 13 of this press release. Net income from continuing operations per share, excluding certain items, increased 37% to $0.70 compared to $0.51 for the prior year quarter. "Our first quarter results reflect a strong start to the year highlighted by organic revenue growth of 8% in Brokerage Americas, excluding contingent commissions, despite soft market conditions. The strength of our industry- leading global network of resources and capabilities, combined with efforts focused on productivity and expense management, led to improvement in all three of our key financial metrics: organic growth, margin expansion and earnings improvement," said Greg Case, president and chief executive officer, Aon Corporation. "We continue to make investments in new markets and talent that will drive future growth. Our balance sheet is strong and we repurchased $345 million of stock during the quarter, highlighting our commitment to creating long-term shareholder value and a belief in the underlying strength of Aon." FIRST QUARTER FINANCIAL SUMMARY Total revenue increased 10% to $2.4 billion with organic revenue growth of 5%. Total expenses increased 9% or $171 million to $2.1 billion due primarily to a $69 million increase in benefits to policyholders, a $61 million unfavorable impact from foreign exchange and a $21 million settlement of litigation for acquired employees in the Reinsurance business, partially offset by a $23 million decrease in restructuring expense. Restructuring expense was $10 million in the first quarter compared to $33 million for the prior year quarter. The previously announced three-year restructuring plan is anticipated to result in cumulative pretax charges of $365 million and annualized cost savings of approximately $235 million in 2007 and $280 million in 2008, on track with previous estimates. An analysis of restructuring related expenses by segment, type and geographic region are detailed on pages 13 and 14 of this release. Restructuring savings realized in the first quarter are estimated at $46 million compared to $18 million in the prior year quarter. Of the estimated restructuring savings in the first quarter, $35 million was related to the Brokerage segment, primarily for workforce reduction. Foreign currency translation gains positively impacted net income by $0.01 per share compared to the prior year quarter due to a weaker U.S. dollar. Effective tax rate on continuing operations was 31.8% for the first quarter compared to 35.0% for the prior year quarter. The effective tax rate for the first quarter was impacted by favorable resolution of certain tax items. Compared to an anticipated effective tax rate of 34%, these items favorably impacted net income from continuing operations by $0.02 per share as highlighted on page 12 of this press release. The company expects a normal effective tax rate on continuing operations of 34% for 2007. Diluted average shares outstanding were 324 million for the first quarter compared to 350 million in the prior year quarter. During the first quarter, the Company repurchased approximately 9.5 million shares of common stock for $345 million at an average price of $36.35 per share. As of March 31, 2007, the company had approximately $582 million available for repurchase under the existing two billion dollar share repurchase program. Discontinued operations after-tax income in the first quarter was $1 million compared to $24 million or $0.07 per share in the prior year quarter. Income from discontinued operations in the prior year quarter primarily reflects the reclassification of Aon Warranty Group and Construction Program Group into discontinued operations. FIRST QUARTER SEGMENT REVIEW Certain noteworthy items impacted revenue, pretax income and pretax margins in the first quarter 2007 and 2006. The first 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 13 of this press release. RISK AND INSURANCE BROKERAGE SERVICES Organic Revenue Less: Growth Acquisi- ex- First Quarter Ended tions, cluding (millions) ------------------- Less: Divest- Con- Mar. Mar. Cur- itures, Less: Organic tingent 31, 31, % rency Tran- All Revenue Comm- Revenue 2007 2006 Change Impact sfers Other Growth issions ------------ ------- ------ ------- ------ ----- ----- ------- -------- Americas $519 $517 -% -% -% (7)% 7% 8% U.K. 156 155 1 7 6 (1) (11) (11) EMEA 434 374 16 8 2 3 3 3 Asia Pacific 100 88 14 5 (2) 3 8 8 Reinsurance 247 246 - 3 (2) (1) - - ------- ------ ------- ------ ----- ----- ------- -------- Total $1,456 $1,380 6% 4% 1% (2)% 3% 3% ======= ====== ======= ====== ===== ===== ======= ======== Risk and Insurance Brokerage Services revenue increased 6% compared to the prior year quarter with organic revenue growth of 3%. The prior year quarter included $35 million of revenue in the Americas related to the contribution of Cambridge preferred stock to a U.K. pension plan, which is excluded from the calculation of organic revenue growth. Americas organic revenue, excluding contingent commissions, increased 8% due primarily to strong new business in U.S. retail and effective renewal book management in both U.S. retail and Latin America. U.K. organic revenue declined 11% due primarily to lower new business and soft market conditions, partially offset by an improved retention rate. EMEA organic revenue increased 3% due primarily to a higher retention rate in Europe and strong growth in emerging markets. Asia Pacific organic revenue increased 8% reflecting strong new business in emerging markets in Asia, partially offset by soft market conditions in Australia. Reinsurance organic revenue increased in Canada and Latin America, offset by soft market conditions and higher cedant retentions. First Quarter Ended -------------------------- (millions) Mar. 31, Mar. 31, % 2007 2006 Change ----------- ---------- --------- Revenue $1,456 $1,380 6% Expenses Compensation and benefits 840 799 5 Other expenses 374 341 10 ----------- ---------- --------- Total expenses 1,214 1,140 6 ----------- ---------- --------- Pretax income $242 $240 1% =========== ========== ========= Pretax margin 16.6% 17.4% Pretax income - adjusted $270 $225 20% Pretax margin - adjusted 18.5% 16.8% Compensation and benefits increased 5% compared to the prior year quarter due primarily to a $36 million unfavorable impact from foreign exchange. Investments in new talent were largely offset by lower restructuring costs and pension expense. Other expenses increased 10% due primarily to a $21 million settlement of litigation in Reinsurance and a $12 million unfavorable impact from foreign exchange. First quarter pretax income was $242 million. Adjusting for certain items detailed on page 13 of this press release, pretax income increased 20% to $270 million and pretax margin increased 170 basis points to 18.5% versus the prior year quarter. CONSULTING Less: (millions) First Quarter Ended Acqui- -------------------- sitions, Less: Dives- Less: Organic Mar. 31, Mar. 31, % Currency titures, All Revenue Revenue 2007 2006 Change Impact Transfers Other Growth ----------- -------- ------- ------ -------- --------- ----- ------- Services $264 $238 11% 4% 4% (1)% 4% Outsourcing 65 70 (7) 3 - 1 (11) -------- ------- ------ -------- --------- ----- ------- Total $329 $308 7% 4% 2% -% 1% ======== ======= ====== ======== ========= ===== ======= Consulting revenue increased 7% to $329 million compared to the prior year quarter with organic revenue growth of 1%. Organic revenue in Consulting Services grew 4% attributable to Financial Advisory and Litigation Consulting (FALC), retirement consulting and Asia Pacific. Organic revenue in Outsourcing decreased 11% due primarily to the previously announced termination of an outsourcing contract. First Quarter Ended -------------------------- (millions) Mar. 31, Mar. 31, % 2007 2006 Change ----------- ---------- --------- Revenue $329 $308 7% Expenses Compensation and benefits 197 194 2 Other expenses 85 84 1 ----------- ---------- --------- Total expenses 282 278 1 ----------- ---------- --------- Pretax income $47 $30 57% =========== ========== ========= Pretax margin 14.3% 9.7% Pretax income - adjusted $49 $36 36% Pretax margin - adjusted 14.9% 11.7% Compensation and benefits and other expenses were both unfavorably impacted by foreign exchange, largely offset by benefits related to the restructuring program and other operational improvements. First quarter pretax income increased 57% to $47 million and the pretax margin increased 460 basis points to 14.3% versus the prior year quarter. Adjusting for certain items detailed on page 13, pretax income increased 36% to $49 million and the pretax margin increased 320 basis points to 14.9%. INSURANCE UNDERWRITING Less: (millions) First Quarter Ended Acqui- -------------------- sitions, Less: Dives- Less: Organic Mar. 31, Mar. 31, % Currency titures, All Revenue Revenue 2007 2006 Change Impact Transfers Other Growth ------------ -------- ------- ------ -------- --------- ----- ------- Accident & Health and Life $573 $481 19% 2% -% 2% 15% Property & Casualty 1 14 (93) N/A N/A N/A N/A -------- ------- ------ -------- --------- ----- ------- Total $574 $495 16% 2% -% 1% 13% ======== ======= ====== ======== ========= ===== ======= Insurance Underwriting revenue increased 16% to $574 million compared to $495 million in the prior year quarter. A&H and Life organic revenue, which is based on written premiums and fees, increased 15% attributable to strong growth of a health product provided by the Sterling Life Insurance subsidiary (Sterling). All remaining Property & Casualty (P&C) business was placed into run-off in the fourth quarter 2006. As organic growth calculations are based on written premium, organic growth comparisons in P&C are not meaningful. First Quarter Ended -------------------------- (millions) Mar. 31, Mar. 31, % 2007 2006 Change ----------- ---------- --------- Revenue $574 $495 16% Expenses Benefits to policyholders 323 254 27 Compensation and benefits 102 96 6 Other expenses 90 92 (2) ----------- ---------- --------- Total expenses 515 442 17 ----------- ---------- --------- Pretax income $59 $53 11% =========== ========== ========= Pretax margin 10.3% 10.7% Pretax income - adjusted $60 $53 13% Pretax margin - adjusted 10.5% 10.7% Benefits to policyholders increased 27% to $323 million versus the prior year quarter due primarily to strong growth in Sterling. Compensation and benefits increased 6% to $102 million versus the prior year quarter due primarily to commissions associated with growth in Sterling. Other expenses decreased 2% to $90 million versus the prior year quarter principally reflecting the runoff of remaining P&C businesses. First quarter pretax income increased 11% to $59 million and the pretax margin was 10.3%. Included in the Underwriting segment is a $2 million pretax loss attributable to the P&C runoff business. Adjusting for certain items detailed on page 13, pretax income increased 13% to $60 million and the pretax margin was 10.5%. UNALLOCATED INCOME AND EXPENSE Unallocated investment income was $32 million in the first quarter compared to a loss of $3 million in the prior year quarter. The first quarter included dividends received from holdings in certain private equity investments. The prior year quarter included a loss related to the revaluation of Endurance warrants. Unallocated expenses increased $11 million to $34 million in the first quarter due primarily to higher professional fees, including the accounting and legal expenses associated with a review of historical equity compensation practices. Interest expense was $35 million in the first quarter compared to $31 million in the prior year quarter. Conference Call and Webcast Details The Company will host a conference call on Friday, May 4, 2007, 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 43,000 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. Safe Harbor Statement 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, potential regulatory or legislative changes that would affect our ability to sell, and be reimbursed at current levels for, our Sterling subsidiary's 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, ERISA class actions, the impact of the analysis of practices relating to stock options, 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 First Quarter Ended --------------------------------- Mar. 31, Mar. 31, Percent (millions except per share data) 2007 2006 (1) Change --------- ---------- --------- Revenue Commissions and fees $1,735 $1,612 8 % Premiums and other 539 464 16 Investment income 107 89 20 --------- ---------- --------- Total revenue 2,381 2,165 10 --------- ---------- --------- Expenses Compensation and benefits 1,152 1,097 5 Other general expenses 510 461 11 Benefits to policyholders 323 254 27 Depreciation and amortization 50 55 (9) Interest expense 35 31 13 Provision for New York and other state settlements - 1 (100) --------- ---------- --------- Total expenses 2,070 1,899 9 --------- ---------- --------- Income from continuing operations before provision for income tax 311 266 17 Provision for income tax (3) 99 93 6 --------- ---------- --------- Income from continuing operations 212 173 23 Discontinued operations Income from discontinued operations 2 39 (95) Provision for income tax (4) 1 15 (93) --------- ---------- --------- Income from discontinued operations 1 24 (96) --------- ---------- --------- Income before accounting change 213 197 8 Cumulative effect of change in accounting principle, net of tax (2) - 1 (100) --------- ---------- --------- Net income $213 $198 8 % ========= ========== ========= Basic net income per share: Continuing operations $0.71 $0.54 31 % Discontinued operations - 0.07 (100) Cumulative effect of change in accounting principle - - - --------- ---------- --------- Net income $0.71 $0.61 16 % ========= ========== ========= Diluted net income per share: Continuing operations $0.66 $0.50 32 % Discontinued operations - 0.07 (100) Cumulative effect of change in accounting principle - - - --------- ---------- --------- Net income $0.66 $0.57 16 % ========= ========== ========= Diluted average common and common equivalent shares outstanding 324.4 350.2 (7)% ========= ========== ========= (1) Certain amounts relating to discontinued operations have been reclassified to conform to the 2007 presentation. (2) Adoption of FASB Statement No. 123(R), "Share-Based Payments," effective January 1, 2006. (3) Tax rate from continuing operations is 31.8% and 35.0% for the first quarters ended March 31, 2007 and 2006, respectively. (4) Tax rate from discontinued operations is 50.0% and 38.5% for the first quarters ended March 31, 2007 and 2006, respectively. Aon Corporation Revenue from Continuing Operations First Quarter Ended ------------------------------------------------------------ Organic Less: Revenue Acquisi- Growth tions, ex- Divest- cluding Less: itures Less: Organic Con- Mar. Mar. Cur- & All Revenue tingent 31, 31, Percent rency Tran- Other Growth Comm- (millions) 2007 2006(1) Change Impact sfers (2) (3) issions ------ ------- ------- ------ ----- ----- ------- ------- Revenue Risk and insurance brokerage services: Americas $519 $517 - % - % - % (7)% 7 % 8 % United Kingdom 156 155 1 7 6 (1) (11) (11) Europe, Middle East & Africa 434 374 16 8 2 3 3 3 Asia Pacific 100 88 14 5 (2) 3 8 8 Reinsurance brokerage and related services 247 246 - 3 (2) (1) - - ------ ------- ------- ------ ----- ----- ------- ------- Total risk and insurance brokerage services 1,456 1,380 6 4 1 (2) 3 3 ------ ------- ------- ------ ----- ----- ------- ------- Consulting Consulting services 264 238 11 4 4 (1) 4 4 Outsourcing 65 70 (7) 3 - 1 (11) (11) ------ ------- ------- ------ ----- ----- ------- ------- Total consulting 329 308 7 4 2 - 1 1 ------ ------- ------- ------ ----- ----- ------- ------- Insurance underwriting Accident & health and life 573 481 19 2 - 2 15 15 Property & casualty 1 14 (93) N/A N/A N/A N/A N/A ------ ------- ------- ------ ----- ----- ------- ------- Total insurance under- writing 574 495 16 2 - 1 13 13 ------ ------- ------- ------ ----- ----- ------- ------- Unallocated revenue 32 (3) N/A N/A N/A N/A N/A N/A Intersegment revenues (10) (15) N/A N/A N/A N/A N/A N/A ------ ------- ------- ------ ----- ----- ------- ------- Total $2,381 $2,165 10 % 3 % 1 % 1 % 5 % 5 % ====== ======= ======= ====== ===== ===== ======= ======= (1) Certain amounts relating to discontinued operations have been reclassified to conform to the 2007 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 Risk and Insurance Brokerage Services - Continuing Operations First Quarter Ended --------------------------------- Mar. 31, Mar. 31, Percent (millions) 2007 2006 (1) Change --------- ----------- --------- Revenue Operating and other revenue $1,411 $1,315 7 % Investment income 45 65 (31) --------- ----------- --------- Total revenue 1,456 1,380 6 --------- ----------- --------- Expenses Compensation and benefits 840 799 5 Other expenses 374 341 10 --------- ----------- --------- Total expenses 1,214 1,140 6 --------- ----------- --------- Income before provision for income tax $242 $240 1 % ========= =========== ========= Pretax margin - income before provision for income tax 16.6% 17.4% Consulting - Continuing Operations First Quarter Ended --------------------------------- Mar. 31, Mar. 31, Percent (millions) 2007 2006 Change --------- ----------- --------- Revenue Operating and other revenue $328 $306 7 % Investment income 1 2 (50) --------- ----------- --------- Total revenue 329 308 7 --------- ----------- --------- Expenses Compensation and benefits 197 194 2 Other expenses 85 84 1 --------- ----------- --------- Total expenses 282 278 1 --------- ----------- --------- Income before provision for income tax $47 $30 57 % ========= =========== ========= Pretax margin - income before provision for income tax 14.3% 9.7% (1) Certain amounts relating to discontinued operations have been reclassified to conform to the 2007 presentation. Aon Corporation- Segments Insurance Underwriting - Continuing Operations First Quarter Ended --------------------------------- Mar. 31, Mar. 31, Percent (millions) 2007 2006 (1) Change --------- ----------- --------- Revenue Premiums and other $545 $470 16 % Investment income 29 25 16 --------- ----------- --------- Total revenue 574 495 16 --------- ----------- --------- Expenses Benefits to policyholders 323 254 27 Compensation and benefits 102 96 6 Other expenses 90 92 (2) --------- ----------- --------- Total expenses 515 442 17 --------- ----------- --------- Income before provision for income tax $59 $53 11 % ========= =========== ========= Pretax margin - income before provision for income tax 10.3% 10.7% Reconciliation of operating segment income before provision for income tax to income from continuing operations before provision for income tax: First Quarter Ended --------------------------------- Mar. 31, Mar. 31, Percent (millions) 2007 2006 (1) Change --------- ----------- --------- Operating segment income Risk and insurance brokerage services $242 $240 1 % Consulting 47 30 57 Insurance underwriting 59 53 11 --------- ----------- --------- Operating segment income before provision for income tax 348 323 8 Unallocated investment income 32 (3) N/A Unallocated expenses (34) (23) 48 Interest expense (35) (31) 13 --------- ----------- --------- Income from continuing operations before provision for income tax $311 $266 17 % ========= =========== ========= (1) Certain amounts related to discontinued operations have been reclassified to conform to the 2007 presentation. Aon Corporation Reconciliation of the Impact of Non-GAAP Measures on Diluted Earnings Per Share First Quarter Ended March 31, 2007 and 2006 First Quarter Ended ----------------------------- Mar. 31, Mar. 31, Percent 2007 2006 Change ---------- --------- -------- Diluted earnings per share from continuing operations - as reported $0.66 $0.50 32 % After tax earnings per share adjustments: Restructuring charges 0.02 0.06 Reinsurance litigation 0.04 - Nonrecurring tax adjustments (0.02) - Gain on Cambridge preferred stock investment - (0.07) Endurance warrants - 0.03 Contingent commissions - (0.01) ---------- --------- Total after tax earnings per share adjustments 0.04 0.01 ---------- --------- Diluted earnings per share from continuing operations - as adjusted $0.70 $0.51 37 % ---------- --------- Diluted average common and common equivalent shares outstanding (millions) 324.4 350.2 ========== ========= Aon Corporation Reconciliation of Non-GAAP Measures - Segments First Quarter Ended March 31, 2007 and 2006 (1) First Quarter Ended March 31, 2007 --------------------------------------------- Risk and Unallo- Insurance Insurance cated Brokerage Under- Income & (millions) Services Consulting writing Expense Total ---------- ---------- ------- ------- ------- Revenue as reported $1,456 $329 $574 $22 $2,381 Income (loss) from continuing operations before provision for income tax - as reported $242 $47 $59 $(37) $311 Restructuring charges 7 2 1 - 10 Reinsurance litigation 21 - - - 21 ---------- ---------- ------- ------- ------- Income (loss) from continuing operations before provision for income tax - as adjusted $270 $49 $60 $(37) $342 ========== ========== ======= ======= ======= Income from continuing operations before provision for income tax - margins as adjusted 18.5% 14.9% 10.5% N/A 14.4% ========== ========== ======= ======= ======= First Quarter Ended March 31, 2006 --------------------------------------------- Risk and Unallo- Insurance Insurance cated Brokerage Under- Income & (millions) Services Consulting writing Expense Total ---------- ---------- ------- ------- ------- Revenue as reported $1,380 $308 $495 $(18) $2,165 Gain on Cambridge preferred stock investment (35) - - - (35) Contingent commissions (6) - - - (6) Endurance warrants - - - 17 17 ---------- ---------- ------- ------- ------- Revenue as adjusted $1,339 $308 $495 $(1) $2,141 ========== ========== ======= ======= ======= Income (loss) from continuing operations before provision for income tax - as reported $240 $30 $53 $(57) $266 Restructuring charges 26 6 - 1 33 Gain on Cambridge preferred stock investment (35) - - - (35) Contingent commissions (6) - - - (6) Endurance warrants - - - 17 17 ---------- ---------- ------- ------- ------- Income (loss) from continuing operations before provision for income tax - as adjusted $225 $36 $53 $(39) $275 ========== ========== ======= ======= ======= Income from continuing operations before provision for income tax - margins as adjusted 16.8% 11.7% 10.7% N/A 12.8% ========== ========== ======= ======= ======= (1) Certain noteworthy items impacted revenue and pretax income in 2007 and 2006, 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 Full First Total Year Year Quarter Incurred Remainder (millions) 2005 2006 2007 to Date of 2007 Total --------------------------------- --------------- Workforce reduction $116 $116 $3 $235 $9 $244 Lease consolidation 20 27 3 50 16 66 Asset impairments 17 12 2 31 3 34 Other costs associated with restructuring 5 12 2 19 2 21 --------------------------------- --------------- Total restructuring and related expenses $158 $167 $10 $335 $30 $365 ================================= =============== By Region: Continent Rest United United of of (millions) States Kingdom Europe World Total ----------------------------------------- 2005 $28 $92 $30 $8 $158 2006 66 56 34 11 167 1st quarter 2007 4 5 1 - 10 ----------------------------------------- Incurred to date 98 153 65 19 335 Estimated remaining 2007 21 3 6 - 30 ----------------------------------------- Total incurred and remaining estimated $119 $156 $71 $19 $365 ========================================= Aon Corporation Preliminary Condensed Consolidated Statements of Financial Position As of --------------------------------- (billions) Mar. 31, 2007 Dec. 31, 2006 --------------- -------------- (Unaudited) ASSETS Investments Fixed maturities at fair value $2.9 $2.8 Short-term investments 4.3 4.3 Other investments 0.5 0.5 --------------- -------------- Total investments 7.7 7.6 Cash 0.3 0.3 Receivables 9.0 9.0 Deferred Policy Acquisition Costs 0.6 0.5 Goodwill 4.7 4.5 Other Intangible Assets 0.2 0.2 Property and Equipment, net 0.5 0.5 Other Assets 1.6 1.7 --------------- -------------- TOTAL ASSETS $24.6 $24.3 =============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Insurance Premiums Payable $10.4 $9.7 Policy Liabilities Future policy benefits 1.8 1.8 Policy and contract claims 0.7 0.6 Unearned and advance premiums and other 0.4 0.4 --------------- -------------- Total Policy Liabilities 2.9 2.8 General Liabilities General expenses 1.6 1.9 Notes payable and short-term borrowings 2.1 2.3 Pension, post-employment and post-retirement liabilities 1.4 1.5 Other liabilities 1.0 0.9 --------------- -------------- TOTAL LIABILITIES 19.4 19.1 Stockholders' Equity 5.2 5.2 --------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24.6 $24.3 =============== ============== DATASOURCE: Aon Corporation CONTACT: Investors, Scott Malchow, 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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