- Revenue increased 8% to $2.0 billion - CHICAGO, Feb. 7
/PRNewswire-FirstCall/ -- Aon Corporation (NYSE:AOC) today reported
results for the fourth quarter and full year ended December 31,
2007. Net income decreased 7% to $207 million or $0.64 per share,
compared to $223 million or $0.67 per share for the prior year
quarter. Net income from continuing operations increased 33% to
$190 million or $0.59 per share, compared to $143 million or $0.43
per share for the prior year quarter. Certain items that impacted
fourth quarter results and comparisons with the prior year quarter
are detailed in the reconciliations of non-GAAP measures on pages
11 and 12 of this press release. Net income from continuing
operations per share, excluding certain items, increased 17% to
$0.69 compared to $0.59 for the prior year quarter. "We are pleased
with our solid fourth quarter results, which reflect the strength
of our industry-leading network of global resources and
capabilities and continued progress in each of our key operating
metrics. Organic revenue growth was two percent in our brokerage
segment and three percent in consulting services, adjusted pretax
margin increased 110 basis points, and adjusted earnings per share
from continuing operations increased 17 percent," said Greg Case,
president and chief executive officer, Aon Corporation. "Our fourth
quarter and 2007 results are fully on schedule with the second year
of our three-year improvement plan. Our expense initiatives and
restructuring programs are delivering meaningful margin improvement
while funding investments in value-added services and capabilities
for our clients. We increased our focus on core assets with the
announced sale of our lower-margin, more capital-intensive
insurance underwriting businesses. Our balance sheet is strong,
which provides financial flexibility, and we increased our
authorized share repurchase program by $2.6 billion. All these
actions support our belief in the underlying strength of Aon and
our ongoing commitment to long-term shareholder value creation."
FOURTH QUARTER FINANCIAL SUMMARY Total revenue increased 8% to $2.0
billion with organic revenue growth of 1%. Total expenses increased
4% or $73 million to $1.8 billion, including a $92 million
unfavorable impact from foreign currency translation. Pension
expense related to the Company's major defined benefit pension
plans declined to $15 million in the fourth quarter compared to $54
million in the prior year quarter. Pension expense declined to $80
million in 2007 compared to $233 million in 2006 due primarily to
plan amendments made in the Company's major defined benefit pension
plans. The Company currently anticipates that 2008 pension expense
will be similar to 2007. Restructuring expense was $34 million in
the fourth quarter compared to $78 million in the prior year
quarter. An analysis of restructuring related expenses by segment
and type for the 2005 and 2007 restructuring programs is detailed
on page 13 of this release. Restructuring savings realized in the
fourth quarter are estimated at $64 million compared to $37 million
in the prior year quarter. Of the estimated restructuring savings
in the fourth quarter, $54 million were related to the Brokerage
segment, primarily for workforce reduction. The 2005 restructuring
program resulted in cumulative cost savings of approximately $225
million in 2007 and is on track to achieve $270 million of
cumulative cost savings in 2008. Cumulative cost savings estimates
do not include any benefits related to businesses placed into
discontinued operations. The 2007 restructuring program, before any
potential reinvestment of savings, is expected to result in
cumulative cost savings of approximately $50-70 million in 2008,
$175-200 million in 2009 and $240 million in 2010, consistent with
previous estimates. Foreign currency translation increased net
income by $0.04 per share compared to the prior year quarter.
Effective tax rate on continuing operations was 30.4% for the
fourth quarter compared to 26.7% for the prior year quarter. Both
quarters were impacted by the resolution of certain items,
non-recurring tax adjustments and tax credits. The Company
currently anticipates that the effective tax rate on continuing
operations will be 33.0% for 2008. Diluted average shares
outstanding declined to 324 million in the fourth quarter compared
to 334 million in the prior year quarter, due primarily to the
Company's share repurchase program. During the fourth quarter, the
Company repurchased 544,700 shares of common stock for $26 million,
at an average price of $47.29 per share. Discontinued Operations
after-tax income was $17 million or $0.05 per share compared to $80
million or $0.24 per share for the prior year quarter. Discontinued
operations include the results of Combined Insurance Company of
America (CICA) and Sterling Life Insurance (Sterling), as well as
the results and dispositions of Aon Warranty Group (AWG) and
Construction Program Group (CPG), which were sold in the fourth
quarter 2006. CICA's fourth quarter 2007 results include a $28
million non-recurring tax adjustment related to the recognition of
deferred taxes of foreign subsidiaries. FOURTH QUARTER SEGMENT
REVIEW Certain noteworthy items impacted revenue, pretax income and
pretax margins in the fourth quarter of 2007 and 2006. The fourth
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 12 of this press release. RISK AND
INSURANCE BROKERAGE SERVICES (millions) Fourth Quarter Ended Less:
-------------------- Less: Acquisitions, Less: Organic Dec 31, Dec
31, % Currency Divestitures, All Revenue Revenue 2007 2006 Change
Impact Transfers Other Growth ------- -------- ------- ------
-------- ------------ ------ ------ Americas $686 $654 5% 2% -% -%
3% U.K. 234 206 14 10 1 4 (1) EMEA 359 291 23 12 2 4 5 Asia Pacific
145 147 (1) 11 (2) (5) (5) Reinsurance 227 224 1 1 1 (4) 3 --------
------- ------ -------- ------------ ------ ------ Total $1,651
$1,522 8% 6% 1% (1)% 2% ======== ======= ====== ========
============ ====== ====== Risk and Insurance Brokerage Services
revenue increased 8% compared to the prior year quarter with
organic revenue growth of 2%. Americas organic revenue increased 3%
primarily reflecting strong growth in Latin America and Affinity.
U.K. organic revenue declined 1% due primarily to soft market
conditions. EMEA organic revenue increased 5% due to solid growth
in continental Europe and strong growth in emerging markets. Asia
Pacific organic revenue decreased 5% reflecting soft market
conditions in Australia and the impact of certain regulatory
changes in Japan, partially offset by solid growth in most other
Asian markets. Reinsurance organic revenue increased 3% due
primarily to growth in global facultative placements and capital
markets transactions, partially offset by soft market conditions
and higher cedant retentions. Fourth Quarter Ended
----------------------- (millions) Dec 31, Dec 31, % 2007 2006
Change ------- ------- ------ Revenue $1,651 $1,522 8% Expenses
Compensation and benefits 932 927 1 Other expenses 438 399 10
------- ------- ------ Total expenses 1,370 1,326 3 ------- -------
------ Pretax income $281 $196 43% ======= ======= ====== Pretax
margin 17.0% 12.9% Pretax income - adjusted $305 $266 15% Pretax
margin - adjusted 18.5% 17.5% Compensation and benefits for the
fourth quarter were essentially unchanged from the prior year
quarter as a $55 million unfavorable impact from foreign currency
translation was offset by lower restructuring costs and benefits
related to the 2005 restructuring program. Other expenses increased
$39 million or 10% compared to the prior year quarter including a
$14 million unfavorable impact from foreign currency translation
and higher restructuring costs, partially offset by benefits
related to the 2005 restructuring program. Fourth quarter pretax
income increased 43% to $281 million. Adjusting for certain items
detailed on page 12 of this press release, pretax income increased
15% to $305 million and pretax margin increased 100 basis points to
18.5% versus the prior year quarter. CONSULTING (millions) Fourth
Quarter Ended Less: -------------------- Less: Acquisitions, Less:
Organic Dec 31, Dec 31, % Currency Divestitures, All Revenue
Revenue 2007 2006 Change Impact Transfers Other Growth -------
-------- ------- ------ -------- ------------ ------ ------
Services $314 $280 12% 5% 2% 2% 3% Outsourcing 59 84 (30) 3 (1) -
(32) -------- ------- ------ -------- ------------ ------ ------
Total $373 $364 2% 5% 2% -% (5)% ======== ======= ====== ========
============ ====== ====== Consulting revenue increased 2% to $373
million compared to the prior year quarter. Organic revenue in
Consulting Services increased 3% due primarily to growth in
compensation and health and benefits consulting. Organic revenue in
Outsourcing decreased 32% due primarily to the previously announced
termination of a significant outsourcing contract. Fourth Quarter
Ended ---------------------- (millions) Dec 31, Dec 31, % 2007 2006
Change ------ ------ ------ Revenue $373 $364 2% Expenses
Compensation and benefits 219 217 1 Other expenses 94 98 (4) ------
------ ------ Total expenses 313 315 (1) ------ ------ ------
Pretax income $60 $49 22% ====== ====== ====== Pretax margin 16.1%
13.5% Pretax income - adjusted $64 $56 14% Pretax margin - adjusted
17.2% 15.4% Total expenses were relatively unchanged versus the
prior year quarter due primarily to lower restructuring charges,
benefits related to the 2005 restructuring program and other
operational improvements, partially offset by a $14 million
unfavorable impact from foreign currency translation. Fourth
quarter pretax income increased 22% to $60 million and the pretax
margin increased 260 basis points to 16.1% versus the prior year
quarter. Adjusting for certain items detailed on page 12, pretax
income increased 14% to $64 million and the pretax margin increased
180 basis points to 17.2%. UNALLOCATED INCOME AND EXPENSE Fourth
Quarter Ended ---------------------- (millions) Dec 31, Dec 31, %
2007 2006 Change ------ ------ ------ Operating segment income
before tax $341 $245 39% Property & Casualty operations (4) (3)
33 Unallocated investment income 11 10 10 Unallocated expenses (39)
(27) 44 Interest expense (36) (30) 20 ------ ------ ------ Income
from continuing operations before tax $273 $195 40% ====== ======
====== Property & Casualty loss was $4 million compared to a
loss of $3 million in the prior year quarter. All property &
casualty business was placed into run-off in the fourth quarter
2006. Unallocated investment income for the fourth quarter
increased $1 million to $11 million compared to the prior year
quarter. Unallocated expenses increased $12 million to $39 million
versus the prior year quarter including the resolution of a $15
million non-cash balance sheet reconciliation difference in the
U.K. Interest expense increased $6 million to $36 million versus
the prior year quarter due primarily to a higher percentage of
borrowings in foreign currencies and higher interest rates. 2007
FINANCIAL SUMMARY Total revenue for 2007 increased 9% to $7.5
billion with organic revenue growth of 2%. Risk and Insurance
Brokerage Services revenue increased 8% to $6.1 billion with
organic revenue growth of 3%. Consulting revenue increased 5% to
$1.4 billion with a decrease in organic revenue of 1%. Net income
for 2007 was $864 million or $2.69 per share, compared to $720
million or $2.13 per share for the prior year. Net income from
continuing operations increased 50% to $672 million or $2.10 per
share, compared to $447 million or $1.33 per share for the prior
year. Certain items that impacted full year results and comparisons
against the prior year are detailed in the reconciliations of the
impact of non-GAAP measures on pages 11 and 12. Net income from
continuing operations, excluding certain items, increased 43% to
$2.37 per share compared to $1.66 per share for the prior year.
During 2007, the Company repurchased approximately 19.1 million
shares of common stock for $751 million at an average price of
$39.30 per share. As of December 31, 2007, the Company had
approximately $2.8 billion of remaining share repurchase
authorization, which includes the $2.6 billion authorized increase
announced during the fourth quarter 2007. Conference Call and
Webcast Details The Company will host a conference call on Friday,
February 8, 2008 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 (NYSE:AOC) is the
leading global provider of risk management services, insurance and
reinsurance brokerage, human capital and management consulting, and
specialty insurance underwriting. Through its 43,000 professionals
worldwide, Aon readily delivers distinctive client value via
innovative and effective risk management and workforce productivity
solutions. Our industry-leading global resources, technical
expertise and industry knowledge are delivered locally through more
than 500 offices in more than 120 countries. Aon was ranked by A.M.
Best as the number one global insurance brokerage in 2007 based on
brokerage revenues, and voted best insurance intermediary, best
reinsurance intermediary, and best employee benefits consulting
firm in 2007 by the readers of Business Insurance. For more
information on Aon, log onto http://www.aon.com/. 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
successfully close the sales of our Combined Insurance and Sterling
Life Insurance businesses, the impact of current, pending and
future regulatory and legislative actions that affect our ability
to market and sell, and be reimbursed at current levels for, our
Sterling subsidiary's Medicare Advantage health plans, 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 U.S. state attorneys general, U.S. state
insurance regulators, U.S. federal prosecutors, U.S. federal
regulators, and regulatory authorities in the U.K. and other
countries, 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.
Investor Contact: Scott Malchow Vice President, Investor Relations
312-381-3983 Media Contact: David Prosperi Vice President, Global
Public Relations 312-381-2485 Aon Corporation Consolidated Summary
of Operations Fourth Quarter Ended Twelve Months Ended
------------------------- ------------------------- (millions
except per Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
share data) 2007 2006 Change 2007 2006 Change -------- --------
-------- -------- -------- ------- Revenue Commissions, fees and
other $1,967 $1,825 8 % $7,170 $6,660 8 % Investment income 65 56
16 301 221 36 -------- -------- -------- -------- -------- -------
Total revenue 2,032 1,881 8 7,471 6,881 9 -------- --------
-------- -------- -------- ------- Expenses Compensation and
benefits 1,168 1,158 1 4,388 4,225 4 Other general expenses 502 429
17 1,726 1,637 5 Depreciation and amortization 53 68 (22) 194 224
(13) Interest expense 36 30 20 138 129 7 Provision for New York and
other state settlements - 1 (100) 1 3 (67) -------- --------
-------- -------- -------- ------- Total expenses 1,759 1,686 4
6,447 6,218 4 -------- -------- -------- -------- -------- -------
Income from continuing operations before provision for income tax
273 195 40 1,024 663 54 Provision for income tax (2) 83 52 60 352
216 63 -------- -------- -------- -------- -------- ------- Income
from continuing operations 190 143 33 672 447 50 Discontinued
operations Income from discontinued operations 75 123 (39) 316 419
(25) Provision for income tax (3) 58 43 35 124 147 (16) --------
-------- -------- -------- -------- ------- Income from
discontinued operations 17 80 (79) 192 272 (29) -------- --------
-------- -------- -------- ------- Income before accounting change
207 223 (7) 864 719 20 Cumulative effect of change in accounting
principle, net of tax (1) - - N/A - 1 (100) -------- --------
-------- -------- -------- ------- Net income $207 $223 (7)% $864
$720 20 % ======== ======== ======== ======== ======== =======
Basic net income per share: Continuing operations $0.63 $0.46 37 %
$2.25 $1.41 60 % Discontinued operations 0.06 0.26 (77) 0.65 0.86
(24) Cumulative effect of change in accounting principle - - - - -
- -------- -------- -------- -------- -------- ------- Net income
$0.69 $0.72 (4)% $2.90 $2.27 28 % ======== ======== ========
======== ======== ======= Diluted net income per share: Continuing
operations $0.59 $0.43 37 % $2.10 $1.33 58 % Discontinued
operations 0.05 0.24 (79) 0.59 0.80 (26) Cumulative effect of
change in accounting principle - - - - - - -------- --------
-------- -------- -------- ------- Net income $0.64 $0.67 (4)%
$2.69 $2.13 26 % ======== ======== ======== ======== ========
======= Diluted average common and common equivalent shares
outstanding 324.1 333.6 323.0 342.1 ======== ======== ========
======== (1) Adoption of FASB Statement No. 123R, "Share-Based
Payments," effective January 1, 2006. (2) Tax rate from continuing
operations is 30.4% and 26.7% for the fourth quarters ended
December 31, 2007 and 2006, respectively, and 34.4% and 32.6% for
the twelve months ended December 31, 2007 and 2006, respectively.
(3) Tax rate from discontinued operations is 77.3% and 35.0% for
the fourth quarters ended December 31, 2007 and 2006, respectively,
and 39.2% and 35.1% for the twelve months ended December 31, 2007
and 2006, respectively. Aon Corporation Revenue from Continuing
Operations Fourth Quarter Ended
--------------------------------------------------------- Less:
Acqui- sitions, Less: Divest- Less: Organic Curr- itures & All
Revenue Dec. 31, Dec. 31, Percent ency Trans- Other Growth
(millions) 2007 2006 Change Impact fers (1) (2) -------- --------
------- ------ ------- ------- ------- Revenue Risk and Insurance
Brokerage Services: Americas $686 $654 5 % 2 % - % - % 3 % United
Kingdom 234 206 14 10 1 4 (1) Europe, Middle East & Africa 359
291 23 12 2 4 5 Asia Pacific 145 147 (1) 11 (2) (5) (5) Reinsurance
brokerage and related services 227 224 1 1 1 (4) 3 --------
-------- ------- ------ ------- ------- ------- Total Risk and
Insurance Brokerage Services 1,651 1,522 8 6 1 (1) 2 --------
-------- ------- ------ ------- ------- ------- Consulting:
Consulting services 314 280 12 5 2 2 3 Outsourcing 59 84 (30) 3 (1)
- (32) -------- -------- ------- ------ ------- ------- -------
Total consulting 373 364 2 5 2 - (5) -------- -------- -------
------ ------- ------- ------- Unallocated revenue 13 18 (28) N/A
N/A N/A N/A Intersegment revenues (5) (23) N/A N/A N/A N/A N/A
-------- -------- ------- ------ ------- ------- ------- Total
$2,032 $1,881 8 % 6 % 1 % - % 1 % ======== ======== ======= ======
======= ======= ======= (1) Includes the impact of investment
income, reimbursable expenses and unusual items. (2) Organic
revenue growth excludes the impact of foreign exchange,
acquisitions, divestitures, transfers and items described in (1).
Aon Corporation Revenue from Continuing Operations Twelve Months
Ended ------------------------------------------------------- Less:
Acqui- sitions, Less: Divest- Less: Organic Curr- itures & All
Revenue Dec. 31, Dec. 31, Percent ency Trans- Other Growth
(millions) 2007 2006 Change Impact fers (1) (2) -------- --------
------- ------ ------- ------- ------- Revenue Risk and Insurance
Brokerage Services: Americas $2,405 $2,319 4 % 1 % - % (2)% 5 %
United Kingdom 815 732 11 7 2 2 - Europe, Middle East & Africa
1,375 1,177 17 8 1 4 4 Asia Pacific 506 478 6 9 (3) (2) 2
Reinsurance brokerage and related services 958 922 4 2 1 (1) 2
-------- -------- ------- ------ ------- ------- ------- Total Risk
and Insurance Brokerage Services 6,059 5,628 8 4 1 - 3 --------
-------- ------- ------ ------- ------- ------- Consulting:
Consulting services 1,117 989 13 4 2 2 5 Outsourcing 235 293 (20) 3
- (1) (22) -------- -------- ------- ------ ------- ------- -------
Total consulting 1,352 1,282 5 4 2 - (1) -------- -------- -------
------ ------- ------- ------- Unallocated revenue 89 30 197 N/A
N/A N/A N/A Intersegment revenues (29) (59) N/A N/A N/A N/A N/A
-------- -------- ------- ------ ------- ------- ------- Total
$7,471 $6,881 9 % 4 % 1 % 2 % 2 % ======== ======== ======= ======
======= ======= ======= (1) Includes the impact of investment
income, reimbursable expenses and unusual items. (2) Organic
revenue growth excludes the impact of foreign exchange,
acquisitions, divestitures, transfers and items described in (1).
Aon Corporation - Segments Risk and Insurance Brokerage Services -
Continuing Operations
---------------------------------------------------------------
Fourth Quarter Ended Twelve Months Ended --------------------------
------------------------- Dec. 31, Dec. 31, Percent Dec. 31, Dec.
31, Percent (millions) 2007 2006 Change 2007 2006 Change --------
-------- -------- -------- -------- ------- Revenue Commissions,
fees and other $1,599 $1,478 8 % $5,853 $5,432 8 % Investment
income 52 44 18 206 196 5 -------- -------- -------- --------
-------- ------- Total revenue 1,651 1,522 8 6,059 5,628 8 --------
-------- -------- -------- -------- ------- Expenses Compensation
and benefits 932 927 1 3,498 3,362 4 Other expenses 438 399 10
1,524 1,425 7 -------- -------- -------- -------- -------- -------
Total expenses 1,370 1,326 3 5,022 4,787 5 -------- --------
-------- -------- -------- ------- Income before provision for
income tax $281 $196 43 % $1,037 $841 23 % ======== ========
======== ======== ======== ======= Pretax income margin 17.0% 12.9%
17.1% 14.9% Consulting - Continuing Operations Fourth Quarter Ended
Twelve Months Ended --------------------------
------------------------- Dec. 31, Dec. 31, Percent Dec. 31, Dec.
31, Percent (millions) 2007 2006 Change 2007 2006 Change --------
-------- -------- -------- -------- ------- Revenue Commissions,
fees and other $372 $363 2 % $1,343 $1,277 5 % Investment income 1
1 - 9 5 80 -------- -------- -------- -------- -------- -------
Total revenue 373 364 2 1,352 1,282 5 -------- -------- --------
-------- -------- ------- Expenses Compensation and benefits 219
217 1 823 811 1 Other expenses 94 98 (4) 340 351 (3) --------
-------- -------- -------- -------- ------- Total expenses 313 315
(1) 1,163 1,162 - -------- -------- -------- -------- --------
------- Income before provision for income tax $60 $49 22 % $189
$120 58 % ======== ======== ======== ======== ======== =======
Pretax income margin 16.1% 13.5% 14.0% 9.4% Reconciliation of
operating segment income before provision for income tax to income
from continuing operations before provision for income tax: Fourth
Quarter Ended Twelve Months Ended -------------------------
------------------------- Dec. 31, Dec. 31, Percent Dec. 31, Dec.
31, Percent (millions) 2007 2006 Change 2007 2006 Change --------
-------- -------- -------- -------- ------- Operating segment
income: Risk and Insurance Brokerage Services $281 $196 43 % $1,037
$841 23 % Consulting 60 49 22 189 120 58 -------- -------- --------
-------- -------- ------- Operating segment income before provision
for income tax 341 245 39 1,226 961 28 Property & Casualty
operations (4) (3) 33 (13) (78) (83) Unallocated investment income
11 10 10 81 15 440 Unallocated expenses (39) (27) 44 (132) (106) 25
Interest expense (36) (30) 20 (138) (129) 7 -------- --------
-------- -------- -------- ------- Income from continuing
operations before provision for income tax $273 $195 40 % $1,024
$663 54 % ======== ======== ======== ======== ======== ======= Aon
Corporation Reconciliation of the Impact of Non-GAAP Measures on
Diluted Earnings Per Share Fourth Quarter and Twelve Months Ended
December 31, 2007 and 2006 Fourth Quarter Ended Twelve Months Ended
------------------------- ------------------------- Dec. 31, Dec.
31, Percent Dec. 31, Dec. 31, Percent (millions except per 2007
2006 Change 2007 2006 Change share data) -------- -------- -------
-------- -------- ------- Income from continuing operations before
provision for income taxes - as reported $273 $195 40 % $1,024 $663
54 % Adjustments: Restructuring charges 34 78 85 159 Gain on sale
of businesses (6) - (36) - Resolution of U.K. balance sheet
reconciliation difference 15 - 15 - Reinsurance litigation - - 21 -
Gain on sale of Cambridge preferred stock investment - - - (35)
Gain on sale of building in Spain - - - (30) Contingent commissions
- - - (15) Property & Casualty reserve adjustments - - - 81
Endurance warrants - - - 14 -------- -------- -------- --------
Income from continuing operations before provision for income taxes
- as adjusted 316 273 16 1,109 837 32 Provision for income taxes
(1) 93 79 350 277 -------- -------- ------- -------- --------
------- Income from continuing operations - as adjusted $223 $194
15 % $759 $560 36 % ======== ======== ======= ======== ========
======= Diluted earnings per share from continuing operations - as
adjusted $0.69 $0.59 17 % $2.37 $1.66 43 % ======== ========
======= ======== ======== ======= Income from discontinued
operations before provision for income taxes - as reported $75 $123
(39)% $316 $419 (25)% Adjustments: Restructuring charges - 8 - 8
CPG reserve adjustment - - - 21 CPG gain on sale - (27) - (27) AWG
gain on sale - (16) - (16) -------- -------- -------- --------
Income from discontinued operations before provision for income
taxes - as adjusted 75 88 (15) 316 405 (22) Provision for income
taxes (2) 30 19 96 130 -------- -------- ------- -------- --------
------- Income from discontinued operations - as adjusted $45 $69
(35)% $220 $275 (20)% ======== ======== ======= ======== ========
======= Diluted earnings per share from discontinued operations -
as adjusted $0.14 $0.21 (33)% $0.68 $0.80 (15)% ======== ========
======= ======== ======== ======= Total earnings per share $0.83
$0.80 4 % $3.05 $2.46 24 % ======== ======== ======= ========
======== ======= Diluted average common and common equivalent
shares outstanding (millions) 324.1 333.6 323.0 342.1 ========
======== ======== ======== (1) Tax rate from continuing operations
is 29.4% and 28.9% for the fourth quarters ended December 31, 2007
and 2006, respectively, and 31.6% and 33.1% for the twelve months
ended December 31, 2007 and 2006, respectively. (2) Tax rate from
discontinued operations is 40.0% and 21.6% for the fourth quarters
ended December 31, 2007 and 2006, respectively, and 30.4% and 32.1%
for the twelve months ended December 31, 2007 and 2006,
respectively. Aon Corporation Reconciliation of Non-GAAP Measures -
Segments Fourth Quarter and Twelve Months Ended December 31, 2007
and 2006 (1) Fourth Quarter Ended December 31, 2007
-------------------------------------------- Risk and Insurance
Unallocated Brokerage Income & (millions) Services Consulting
Expense Total ----------- ---------- ----------- ------- Revenue as
reported $1,651 $373 $8 $2,032 Income (loss) from continuing
operations before provision for income tax - as reported $281 $60
$(68) $273 Restructuring charges 30 4 - 34 Gain on sale of
businesses (6) - - (6) Resolution of U.K. balance sheet
reconciliation difference - - 15 15 Reinsurance litigation - - - -
----------- ---------- ----------- ------- Income (loss) from
continuing operations before provision for income tax - as adjusted
$305 $64 $(53) $316 =========== ========== =========== =======
Income from continuing operations before provision for income tax -
margins as adjusted 18.5% 17.2% N/A 15.6% =========== ==========
=========== ======= Twelve Months Ended December 31, 2007
-------------------------------------------- Risk and Insurance
Unallocated Brokerage Income & (millions) Services Consulting
Expense Total ----------- ---------- ----------- ------- Revenue as
reported $6,059 $1,352 $60 $7,471 Income (loss) from continuing
operations before provision for income tax - as reported $1,037
$189 $(202) $1,024 Restructuring charges 74 11 - 85 Gain on sale of
businesses (36) - - (36) Resolution of U.K. balance sheet
reconciliation difference - - 15 15 Reinsurance litigation 21 - -
21 ----------- ---------- ----------- ------- Income (loss) from
continuing operations before provision for income tax - as adjusted
$1,096 $200 $(187) $1,109 =========== ========== ===========
======= Income from continuing operations before provision for
income tax - margins as adjusted 18.1% 14.8% N/A 14.8% ===========
========== =========== ======= Fourth Quarter Ended December 31,
2006 -------------------------------------------- Risk and
Insurance Unallocated Brokerage Income & (millions) Services
Consulting Expense Total ----------- ---------- ----------- -------
Revenue as reported $1,522 $364 $(5) $1,881 Gain on Cambridge
preferred stock investment - - - - Contingent commissions - - - -
Endurance warrants - - - - ----------- ---------- -----------
------- Revenue as adjusted $1,522 $364 $(5) $1,881 ===========
========== =========== ======= Income (loss) from continuing
operations before provision for income tax - as reported $196 $49
$(50) $195 Restructuring charges 70 7 1 78 Gain on sale of
Cambridge preferred stock investment - - - - Gain on sale of
building in Spain - - - - Contingent commissions - - - - Property
& Casualty reserve adjustments - - - - Endurance warrants - - -
- ----------- ---------- ----------- ------- Income (loss) from
continuing operations before provision for income tax - as adjusted
$266 $56 $(49) $273 =========== ========== =========== =======
Income from continuing operations before provision for income tax -
margins as adjusted 17.5% 15.4% N/A 14.5% =========== ==========
=========== ======= Twelve Months Ended December 31, 2006
-------------------------------------------- Risk and Insurance
Unallocated Brokerage Income & (millions) Services Consulting
Expense Total ----------- ---------- ----------- ------- Revenue as
reported $5,628 $1,282 $(29) $6,881 Gain on Cambridge preferred
stock investment (35) - - (35) Contingent commissions (15) - - (15)
Endurance warrants - - 14 14 ----------- ---------- -----------
------- Revenue as adjusted $5,578 $1,282 $(15) $6,845 ===========
========== =========== ======= Income (loss) from continuing
operations before provision for income tax - as reported $841 $120
$(298) $663 Restructuring charges 136 20 3 159 Gain on sale of
Cambridge preferred stock investment (35) - - (35) Gain on sale of
building in Spain (30) - - (30) Contingent commissions (15) - -
(15) Property & Casualty reserve adjustments - - 81 81
Endurance warrants - - 14 14 ----------- ---------- -----------
------- Income (loss) from continuing operations before provision
for income tax - as adjusted $897 $140 $(200) $837 ===========
========== =========== ======= Income from continuing operations
before provision for income tax - margins as adjusted 16.1% 10.9%
N/A 12.2% =========== ========== =========== ======= (1) Certain
noteworthy items impacted revenue and pretax income in 2007 and
2006, which are described in this schedule. The revenue and pretax
income (loss) amounts and related margins shown in the captions
"Revenue as adjusted" and "Income (loss) from continuing operations
before provision for income tax - as adjusted" are non-GAAP
measures. Aon Corporation 2007 Restructuring Plan | By Type: Actual
|Estimated ---------------------------|---------- Third Fourth
Total | Quarter Quarter Incurred | (millions) 2007 2007 to Date |
Total ---------------------------|---------- Workforce reduction
(Compensation | and benefits) $10 $7 $17| $220 Lease consolidation
(Other general | expenses) 4 18 22| 79 Asset impairments
(Depreciation and | amortization) 2 2 4| 41 Other costs associated
with | restructuring (Other general | expenses) 1 2 3| 20
---------------------------|---------- Total restructuring and
related | expenses $17 $29 $46| $360
===========================|========== By Segment: Actual
|Estimated ---------------------------|---------- Third Fourth
Total | Quarter Quarter Incurred | (millions) 2007 2007 to Date |
Total ---------------------------|---------- Risk and Insurance
Brokerage | Services $16 $25 $41| $320 Consulting 1 4 5| 40
---------------------------|---------- Total restructuring and
related | expenses $17 $29 $46| $360
===========================|========== 2005 Restructuring Plan By
Type: Actual ------------------------------------------------ Nine
Fourth Full Full Year Full Year Months Quarter Year (millions) 2005
2006 2007 2007 2007 Total
------------------------------------------------ Workforce
reduction (Compensation and benefits) $116 $116 $18 $3 $21 $253
Lease consolidation (Other general expenses) 20 27 11 2 13 60 Asset
impairments (Depreciation and amortization) 17 12 3 - 3 32 Other
costs associated with restructuring (Other general expenses) 5 12 4
- 4 21 ------------------------------------------------ Total
restructuring and related expenses $158 $167 $36 $5 $41 $366
================================================ By Segment: Actual
------------------------------------------------ Nine Fourth Full
Full Year Full Year Months Quarter Year (millions) 2005 2006 2007
2007 2007 Total ------------------------------------------------
Risk and Insurance Brokerage Services $143 $136 $28 $5 $33 $312
Consulting 8 20 6 - 6 34 Unallocated income and expense 4 3 - - - 7
------------------------------------------------ Restructuring and
related expenses - continuing operations 155 159 34 5 39 353
Restructuring and related expenses - discontinued operations 3 8 2
- 2 13 ------------------------------------------------ Total
restructuring and related expenses $158 $167 $36 $5 $41 $366
================================================ Aon Corporation
Consolidated Summary of Operations - Reclassified for Discontinued
Operations 2006 --------------------------------------------
(millions except per share 1st 2nd 3rd 4th Full data) Quarter
Quarter Quarter Quarter Year
-------------------------------------------- Revenue Commissions,
fees and other $1,610 $1,644 $1,581 $1,825 $6,660 Investment income
59 51 55 56 221 -------- ------- ------- -------- ------- Total
revenue 1,669 1,695 1,636 1,881 6,881 -------- ------- -------
-------- ------- Expenses Compensation and benefits 1,005 1,037
1,025 1,158 4,225 Other general expenses 371 387 450 429 1,637
Depreciation and amortization 52 51 53 68 224 Interest expense 31
34 34 30 129 Provision for New York and other state settlements 1 1
- 1 3 -------- ------- ------- -------- ------- Total expenses
1,460 1,510 1,562 1,686 6,218 -------- ------- ------- --------
------- Income from continuing operations before provision for
income tax 209 185 74 195 663 Provision for income tax 73 64 27 52
216 -------- ------- ------- -------- ------- Income from
continuing operations 136 121 47 143 447 Discontinued operations
Income from discontinued operations 96 111 89 123 419 Provision for
income tax 35 39 30 43 147 -------- ------- ------- --------
------- Income from discontinued operations 61 72 59 80 272
-------- ------- ------- -------- ------- Income before accounting
change 197 193 106 223 719 Cumulative effect of change in
accounting principle, net of tax 1 - - - 1 -------- ------- -------
-------- ------- Net income $198 $193 $106 $223 $720 ========
======= ======= ======== ======= Basic net income per share: Income
from continuing operations $0.42 $0.37 $0.15 $0.46 $1.41
Discontinued operations 0.19 0.23 0.19 0.26 0.86 Cumulative effect
of change in accounting principle - - - - - -------- -------
------- -------- ------- Net income $0.61 $0.60 $0.34 $0.72 $2.27
======== ======= ======= ======== ======= Dilutive net income per
share: Income from continuing operations $0.40 $0.36 $0.15 $0.43
$1.33 Discontinued operations 0.17 0.21 0.17 0.24 0.80 Cumulative
effect of change in accounting principle - - - - - -------- -------
------- -------- ------- Net income $0.57 $0.57 $0.32 $0.67 $2.13
======== ======= ======= ======== ======= Dilutive average common
and common equivalent shares outstanding 350.2 344.8 340.1 333.6
342.1 ======== ======= ======= ======== ======= 2007
-------------------------------------------- (millions except per
share 1st 2nd 3rd 4th Full data) Quarter Quarter Quarter Quarter
Year -------------------------------------------- Revenue
Commissions, fees and other $1,729 $1,776 $1,698 $1,967 $7,170
Investment income 69 90 77 65 301 -------- ------- ------- --------
------- Total revenue 1,798 1,866 1,775 2,032 7,471 --------
------- ------- -------- ------- Expenses Compensation and benefits
1,053 1,109 1,058 1,168 4,388 Other general expenses 423 395 406
502 1,726 Depreciation and amortization 47 46 48 53 194 Interest
expense 35 34 33 36 138 Provision for New York and other state
settlements - 1 - - 1 -------- ------- ------- -------- -------
Total expenses 1,558 1,585 1,545 1,759 6,447 -------- -------
------- -------- ------- Income from continuing operations before
provision for income tax 240 281 230 273 1,024 Provision for income
tax 75 98 96 83 352 -------- ------- ------- -------- -------
Income from continuing operations 165 183 134 190 672 Discontinued
operations Income from discontinued operations 73 87 81 75 316
Provision for income tax 25 30 11 58 124 -------- ------- -------
-------- ------- Income from discontinued operations 48 57 70 17
192 -------- ------- ------- -------- ------- Income before
accounting change 213 240 204 207 864 Cumulative effect of change
in accounting principle, net of tax - - - - - -------- -------
------- -------- ------- Net income $213 $240 $204 $207 $864
======== ======= ======= ======== ======= Basic net income per
share: Income from continuing operations $0.55 $0.62 $0.45 $0.63
$2.25 Discontinued operations 0.16 0.19 0.24 0.06 0.65 Cumulative
effect of change in accounting principle - - - - - -------- -------
------- -------- ------- Net income $0.71 $0.81 $0.69 $0.69 $2.90
======== ======= ======= ======== ======= Dilutive net income per
share: Income from continuing operations $0.51 $0.57 $0.42 $0.59
$2.10 Discontinued operations 0.15 0.18 0.22 0.05 0.59 Cumulative
effect of change in accounting principle - - - - - -------- -------
------- -------- ------- Net income $0.66 $0.75 $0.64 $0.64 $2.69
======== ======= ======= ======== ======= Dilutive average common
and common equivalent shares outstanding 324.4 321.9 321.5 324.1
323.0 ======== ======= ======= ======== ======= Aon Corporation
Segments - Reclassification for Discontinued Operations 2006
----------------------------------------------- 1st 2nd 3rd 4th
(millions) Quarter Quarter Quarter Quarter Full Year ---------
------- ------- ------- --------- Revenue Risk and insurance
brokerage services $1,380 $1,385 $1,341 $1,522 $5,628 Consulting
308 309 301 364 1,282 Insurance underwriting: As reported 495 505
519 527 2,046 Less: reclassification to discontinued operations
(490) (504) (518) (519) (2,031) Less: reclassification to
unallocated revenue (5) (1) (1) (8) (15) --------- ------- -------
------- --------- As reclassified - - - - - Unallocated revenue: As
reported (3) 18 19 23 57 Less: reclassification to discontinued
operations (6) (9) (14) (13) (42) Add: reclassification from
insurance underwriting 5 1 1 8 15 --------- ------- ------- -------
--------- As reclassified (4) 10 6 18 30 Intersegment revenues (15)
(9) (12) (23) (59) --------- ------- ------- ------- ---------
Total $1,669 $1,695 $1,636 $1,881 $6,881 ========= ======= =======
======= ========= Income (loss) before income tax Risk and
insurance brokerage services $240 $215 $190 $196 $841 Consulting 30
23 18 49 120 Insurance underwriting : As reported 53 75 (27) 36 137
Less: reclassification to discontinued operations (53) (73) (54)
(42) (222) Less: reclassification to unallocated income - (2) 81 6
85 --------- ------- ------- ------- --------- As reclassified - -
- - - Unallocated income: As reported (57) (46) (42) (33) (178)
Less: reclassification to discontinued operations (4) (9) (11) (11)
(35) Add: reclassification from insurance underwriting - 2 (81) (6)
(85) --------- ------- ------- ------- --------- As reclassified
(61) (53) (134) (50) (298) --------- ------- ------- -------
--------- Total $209 $185 $74 $195 $663 ========= ======= =======
======= ========= Income from continuing operations before income
tax - margins Risk and insurance brokerage services 17.4% 15.5%
14.2% 12.9% 14.9% Consulting 9.7% 7.4% 6.0% 13.5% 9.4% Insurance
underwriting: As reported 10.7% 14.9% -5.2% 6.8% 6.7% As
reclassified N/A N/A N/A N/A N/A Total: As reported 12.3% 12.1%
6.4% 10.3% 10.3% As reclassified 12.5% 10.9% 4.5% 10.4% 9.6% 2007
---------------------------------- 1st 2nd 3rd Nine (millions)
Quarter Quarter Quarter Months ------- ------- ------- -------
Revenue Risk and insurance brokerage services $1,456 $1,515 $1,437
$4,408 Consulting 329 325 325 979 Insurance underwriting : As
reported 574 610 627 1,811 Less: reclassification to discontinued
operations (573) (607) (624) (1,804) Less: reclassification to
unallocated revenue (1) (3) (3) (7) ------- ------- ------- -------
As reclassified - - - - Unallocated revenue: As reported 32 44 26
102 Less: reclassification to discontinued operations (10) (15) (8)
(33) Add: reclassification from insurance underwriting 1 3 3 7
------- ------- ------- ------- As reclassified 23 32 21 76
Intersegment revenues (10) (6) (8) (24) ------- ------- -------
------- Total $1,798 $1,866 $1,775 $5,439 ======= ======= =======
======= Income (loss) before income tax Risk and insurance
brokerage services $242 $278 $236 $756 Consulting 47 44 38 129
Insurance underwriting : As reported 59 67 63 189 Less:
reclassification to discontinued operations (64) (70) (70) (204)
Less: reclassification to unallocated income 5 3 7 15 -------
------- ------- ------- As reclassified - - - - Unallocated income:
As reported (37) (24) (25) (86) Less: reclassification to
discontinued operations (7) (14) (12) (33) Add: reclassification
from insurance underwriting (5) (3) (7) (15) ------- -------
------- ------- As reclassified (49) (41) (44) (134) -------
------- ------- ------- Total $240 $281 $230 $751 ======= =======
======= ======= Income from continuing operations before income tax
- margins Risk and insurance brokerage services 16.6% 18.3% 16.4%
17.2% Consulting 14.3% 13.5% 11.7% 13.2% Insurance underwriting: As
reported 10.3% 11.0% 10.0% 10.4% As reclassified N/A N/A N/A N/A
Total: As reported 13.1% 14.7% 13.0% 13.6% As reclassified 13.3%
15.1% 13.0% 13.8% Aon Corporation Accident & Health and Life
2006 ------------------------------------------ 1st 2nd 3rd 4th
Full (millions except per share data) Quarter Quarter Quarter
Quarter Year ------------------------------------------ Revenue
Commissions and fees $3 $7 $6 $6 $22 Premiums and other 463 472 489
489 1,913 Investment income 30 34 37 37 138 -------- -------
------- ------- ------ Total revenue 496 513 532 532 2,073 --------
------- ------- ------- ------ Expenses Compensation and benefits
92 94 91 99 376 Other general expenses 94 80 107 104 385 Benefits
to policyholders 250 253 266 273 1,042 Depreciation and
amortization 3 4 3 3 13 -------- ------- ------- ------- ------
Total expenses 439 431 467 479 1,816 -------- ------- -------
------- ------ Income before provision for income tax 57 82 65 53
257 Provision for income tax 20 28 22 8 78 -------- ------- -------
------- ------ Net income $37 $54 $43 $45 $179 ======== =======
======= ======= ====== Basic net income per share $0.11 $0.17 $0.14
$0.15 $0.56 ======== ======= ======= ======= ====== Dilutive net
income per share $0.11 $0.16 $0.13 $0.13 $0.52 ======== =======
======= ======= ====== Dilutive average common and common
equivalent shares outstanding 350.2 344.8 340.1 333.6 342.1
======== ======= ======= ======= ====== 2007
------------------------------------------ 1st 2nd 3rd 4th Full
(millions except per share data) Quarter Quarter Quarter Quarter
Year ------------------------------------------ Revenue Commissions
and fees $6 $5 $6 $12 $29 Premiums and other 539 573 587 611 2,310
Investment income 38 44 39 42 163 -------- ------- ------- -------
------ Total revenue 583 622 632 665 2,502 -------- ------- -------
------- ------ Expenses Compensation and benefits 99 98 98 99 394
Other general expenses 93 89 87 139 408 Benefits to policyholders
317 348 363 338 1,366 Depreciation and amortization 3 3 2 3 11
-------- ------- ------- ------- ------ Total expenses 512 538 550
579 2,179 -------- ------- ------- ------- ------ Income before
provision for income tax 71 84 82 86 323 Provision for income tax
24 29 28 56 137 -------- ------- ------- ------- ------ Net income
$47 $55 $54 $30 $186 ======== ======= ======= ======= ====== Basic
net income per share $0.16 $0.19 $0.18 $0.10 $0.63 ======== =======
======= ======= ====== Dilutive net income per share $0.14 $0.17
$0.17 $0.09 $0.58 ======== ======= ======= ======= ====== Dilutive
average common and common equivalent shares outstanding 324.4 321.9
321.5 324.1 323.0 ======== ======= ======= ======= ======
DATASOURCE: Aon Corporation CONTACT: Investors, Scott Malchow, Vice
President, Investor Relations, +1-312-381-3983, or Media, David
Prosperi, Vice President, Global Public Relations, +1-312-381-2485,
both of Aon Corporation Web site: http://www.aon.com/
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