AOC Aon Corp.

- Total Revenue grew 6% to $2.0 billion with Organic Revenue growth of 2% CHICAGO, July 31 /PRNewswire-FirstCall/ -- Aon Corporation (NYSE:AOC) today reported results for the second quarter ended June 30, 2008. Net income increased 372% to $1.1 billion or $3.71 per share, compared to $240 million or $0.75 per share for the prior year quarter, including a $1.0 billion after-tax gain on the sales of CICA and Sterling. Net income from continuing operations decreased 8% to $168 million or $0.55 per share, compared to $183 million or $0.57 per share for the prior year quarter. Net income from continuing operations per share, excluding certain items, increased 25% to $0.71 compared to $0.57 for the prior year quarter. Certain items that impacted second quarter results and comparisons with the prior year quarter are detailed in the reconciliation of non-GAAP measures on page 11 of this press release. "Our second quarter results reflect a 25 percent increase in adjusted earnings per share from continuing operations, highlighted by two percent organic revenue growth and a 30 basis point increase in adjusted pretax margin from our Brokerage segment, despite unusually high legacy litigation accruals," said Greg Case, president and chief executive officer, Aon Corporation. "Our core assets are now strategically aligned as we completed the sales of our remaining insurance underwriting businesses. Our 2007 restructuring program is on-track and beginning to deliver benefits, driving margin improvement, while funding investments to generate future revenue growth. We returned more than one billion dollars to our shareholders through the share repurchase program, demonstrating a continued belief in the underlying strength of Aon, and an effective use of capital to create long-term value for our shareholders." SECOND QUARTER FINANCIAL SUMMARY Total revenue increased 6% to $2.0 billion with organic revenue growth of 2%. Total operating expenses increased 9% or $145 million to $1.7 billion, including a $77 million unfavorable impact from foreign currency translation, $28 million increase in restructuring expense and $20 million of legacy litigation accruals. Restructuring expense was $53 million in the second quarter compared to $25 million in the prior year quarter. An analysis of restructuring-related expenses by segment and type for the 2007 restructuring program is detailed on page 12 of this release. Restructuring savings in the second quarter related to the 2005 restructuring program are estimated at $67 million compared to $56 million in the prior year quarter. Of the estimated restructuring savings in the second quarter, $57 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. Restructuring savings in the second quarter related to the 2007 restructuring program are estimated at $16 million compared to no material savings in the prior year quarter. These savings were all related to the Brokerage segment, primarily for workforce reduction. Before any potential reinvestment of savings, the 2007 restructuring program 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 approximately $0.06 per share compared to the prior year quarter due primarily to a weaker U.S. dollar versus the Euro. Effective tax rate on continuing operations was 25.7% for the second quarter compared to 34.9% for the prior year quarter. The rate in the second quarter includes an underlying tax rate on operations of 30.0% and the favorable resolution of prior year tax issues in the U.K. Average diluted shares outstanding declined to 305 million in the second quarter compared to 322 million in the prior year quarter, due primarily to the Company's share repurchase program. During the second quarter, the Company repurchased 24.5 million shares of common stock for $1.1 billion, at an average price of $45.82 per share. As of June 30, the Company had approximately $1.3 billion of remaining share repurchase authorization. Discontinued Operations after-tax income was $1.0 billion or $3.16 per share compared to $57 million or $0.18 per share for the prior year quarter. Discontinued operations for the second quarter included a $1.0 billion after-tax gain, subject to post-closing adjustments, related to the completed sales of both CICA and Sterling Life Insurance on April 1. SECOND QUARTER SEGMENT REVIEW Certain noteworthy items impacted revenue, pretax income and pretax margins in the second quarter of 2008 and 2007. The second 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 and Diluted Earnings Per Share" on page 11 of this press release. RISK AND INSURANCE BROKERAGE SERVICES (millions) Second Quarter Ended Less: -------------------- Less: Acquisitions, Less: Organic Jun 30, Jun 30, % Currency Divestitures, All Revenue Revenue 2008 2007 Change Impact Transfers Other Growth --------- ------- ------ -------- ------------ ------ ------ Americas $625 $618 1% 2% -% -% (1)% U.K. 223 218 2 2 1 (2) 1 EMEA 382 307 24 15 - 2 7 Asia Pacific 152 138 10 10 (2) 1 1 Reinsurance 251 234 7 6 6 (7) 2 --------- ------- ------ -------- ------------ ------ ------ Total $1,633 $1,515 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 decreased 1% reflecting a slowdown in private equity and commercial construction activity in U.S. Retail and soft market conditions, partially offset by strong growth in Latin America. U.K. organic revenue increased 1% due primarily to growth in Affinity products. EMEA organic revenue increased 7% due to solid growth in continental Europe and strong growth in emerging markets. Asia Pacific organic revenue increased 1% reflecting solid growth in most Asian markets, primarily offset by the impact of certain regulatory changes in Japan. Reinsurance organic revenue increased 2% due primarily to growth in global facultative placements and capital markets transactions, partially offset by soft market conditions and higher cedent retentions. Second Quarter Ended ------------------------ (millions) Jun 30, Jun 30, % 2008 2007 Change -------- --------- -------- Revenue $1,633 $1,515 8% Expenses Compensation and benefits 933 884 6 Other expenses 466 382 22 -------- --------- -------- Total operating expenses 1,399 1,266 11 Operating income $234 $249 (6)% Other (income) expense (1) (29) (97) -------- --------- -------- Pretax income $235 $278 (15)% ======== ========= ======== Pretax margin 14.4% 18.3% Pretax income - adjusted $295 $269 10% Pretax margin - adjusted 18.1% 17.8% Compensation and benefits for the second quarter increased 6% or $49 million from the prior year quarter including a $47 million unfavorable impact from foreign currency translation, $11 million increase in restructuring costs and investments in key talent, partially offset by benefits related to the 2005 and 2007 restructuring programs. Other expenses increased 22% or $84 million compared to the prior year quarter including $20 million of legacy litigation accruals, an $18 million unfavorable impact from foreign currency translation, $17 million increase in restructuring costs and $11 million for the previously disclosed reviews under the Foreign Corrupt Practices Act (FCPA) and similar laws in other countries and related compliance initiatives. Second quarter pretax income decreased 15% to $235 million. Adjusting for certain items detailed on page 11 of this press release, pretax income increased 10% to $295 million and pretax margin increased 30 basis points to 18.1% versus the prior year quarter. Absent the $20 million of legacy litigation accruals in the second quarter, adjusted pretax margin would have increased 150 basis points from the prior year quarter. CONSULTING (millions) Second Quarter Ended Less: -------------------- Less: Acquisitions, Less: Organic Jun 30, Jun 30, % Currency Divestitures, All Revenue Revenue 2008 2007 Change Impact Transfers Other Growth ------- -------- ------- ------ -------- ------------- ------ ------- Services $279 $269 4% 4% (1)% (2)% 3% Outsourcing 57 56 2 1 (1) 2 - -------- ------- ------ -------- ------------- ------ ------- Total $336 $325 3% 4% (1)% (2)% 2% ======== ======= ====== ======== ============= ====== ======= Consulting revenue increased 3% to $336 million compared to the prior year quarter. The prior year quarter revenue included a $5 million gain from the sale of an equity investment. Organic revenue in Consulting Services increased 3% reflecting growth internationally in retirement and health and benefits consulting. Organic revenue in Outsourcing was similar to the prior year quarter due primarily to modest growth in benefits outsourcing, offset by a decline related to the previously announced termination of a significant outsourcing contract. Second Quarter Ended ---------------------- (millions) Jun 30, Jun 30, % 2008 2007 Change ------- -------- -------- Revenue $336 $325 3% Expenses Compensation and benefits 205 198 4 Other expenses 89 83 7 ------- -------- -------- Total operating expenses 294 281 5 Operating income $42 $44 (5)% Other (income) expense (1) - N/A ------- -------- -------- Pretax income $43 $44 (2)% ======= ======== ======== Pretax margin 12.8% 13.5% Pretax income - adjusted $47 $48 (2)% Pretax margin - adjusted 14.0% 14.8% Compensation and benefits for the second quarter increased 4% or $7 million from the prior year quarter including an $8 million unfavorable impact from foreign currency translation and investments in key talent, partially offset by benefits related to the 2005 restructuring program. Other expenses increased 7% or $6 million compared to the prior year quarter including a $3 million unfavorable impact from foreign currency translation. Second quarter pretax income decreased 2% to $43 million and the pretax margin decreased 70 basis points to 12.8% versus the prior year quarter. Adjusting for certain items detailed on page 11, pretax income decreased 2% to $47 million and the pretax margin decreased 80 basis points to 14.0%. Absent the $5 million equity investment gain recorded in the prior year quarter, adjusted pretax margin for the second quarter would have increased 60 basis points from the prior year quarter. UNALLOCATED INCOME AND EXPENSE Second Quarter Ended --------------------- (millions) Jun 30, Jun 30, % 2008 2007 Change ------- ------- ------ Operating segment income before tax $278 $322 (14)% Property & Casualty operations (1) (2) (50) Unallocated investment income 17 29 (41) Unallocated expenses (37) (34) 9 Interest expense (31) (34) (9) ------- ------- ------ Income from continuing operations before tax $226 $281 (20)% ======= ======= ====== Property & Casualty loss declined $1 million compared to the prior year quarter. All property & casualty business was placed into run-off in the fourth quarter 2006. Unallocated investment income for the second quarter decreased $12 million to $17 million compared to the prior year quarter. The Company recorded no income during the second quarter related to certain private equity investments compared to $26 million in the prior year quarter, as the timing of distributions are subject to completed transactions in the underlying portfolios. The decline in income from these private equity investments was partially offset by interest income on higher cash balances. Unallocated expenses increased $3 million to $37 million versus the prior year quarter due primarily to absorbed costs previously allocated to the insurance underwriting businesses. Interest expense decreased $3 million to $31 million due primarily to redemption of the Company's outstanding convertible debt in November 2007. Conference Call and Webcast Details The Company will host a conference call on Friday, August 1, 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. Through its 36,000 colleagues 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 named the world's best broker by Euromoney magazine's 2008 Insurance Survey. In 2008, Aon was ranked as the world's largest insurance broker by Business Insurance. Aon also was ranked by A.M. Best as the number one global insurance brokerage in 2007 and 2008 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, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, the outcome of inquiries from regulators and investigations related to compliance with the U.S. Foreign Corrupt Practices Act and non-U.S. anti-corruption laws, 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, and the cost of resolution of other contingent liabilities and loss contingencies. 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 and several additional measures including expenses, margins and income per share, that exclude the effects of restructuring charges and certain other noteworthy items that affected results for the comparable periods. Organic revenue growth excludes from reported revenues the impact of foreign exchange, acquisitions, divestitures, transfers between business units, investment income, reimbursable expenses and unusual items. Reconciliation is provided in the attached schedules. Supplemental organic revenue growth information and additional measures that exclude the effects of the restructuring charges and certain other items do not affect net income or any other GAAP reported amounts. Management believes that these measures are important to make meaningful period-to-period comparisons and that this supplemental information is helpful to investors. 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: Media Contact: Scott Malchow David Prosperi Vice President, Investor Relations Vice President, Global Public Relations 312-381-3983 312-381-2485 Aon Corporation Consolidated Summary of Operations (Unaudited) Second Quarter Ended Six Months Ended ---------------------------- ---------------------------- (millions except June 30, June 30, Percent June 30, June 30, Percent per share data) 2008 2007 Change 2008 2007 Change -------- -------- -------- -------- -------- -------- Revenue -------- Commissions, fees and other $1,912 $1,776 8% $3,785 $3,505 8% Investment income 68 90 (24) 127 159 (20) -------- -------- -------- -------- -------- -------- Total revenue 1,980 1,866 6 3,912 3,664 7 -------- -------- -------- -------- -------- -------- Expenses --------- Compensation and benefits 1,155 1,109 4 2,321 2,162 7 Other general expenses 512 425 20 943 848 11 Depreciation and amortization 58 46 26 108 93 16 -------- -------- -------- -------- -------- -------- Total operating expenses 1,725 1,580 9 3,372 3,103 9 -------- -------- -------- -------- -------- -------- Operating income 255 286 (11) 540 561 (4) Interest expense 31 34 (9) 64 69 (7) Other income (2) (29) (93) (6) (29) (79) -------- -------- -------- -------- -------- -------- Income from continuing operations before provision for income tax 226 281 (20) 482 521 (7) Provision for income tax (1) 58 98 (41) 135 173 (22) -------- -------- -------- -------- -------- -------- Income from continuing operations 168 183 (8) 347 348 - Discontinued operations Income from discontinued operations 1,428 87 1,541 1,491 160 832 Provision for income tax (2) 463 30 1,443 487 55 785 -------- -------- -------- -------- -------- -------- Income from discontinued operations 965 57 1,593 1,004 105 856 -------- -------- -------- -------- -------- -------- Net income $1,133 $240 372% $1,351 $453 198% ======== ======== ======== ======== ======== ======== Basic net income per share: Continuing operations $0.58 $0.62 (6)% $1.17 $1.18 (1)% Discontinued operations 3.33 0.19 1,653 3.38 0.35 866 -------- -------- -------- -------- -------- -------- Net income $3.91 $0.81 383% $4.55 $1.53 197% ======== ======== ======== ======== ======== ======== Diluted net income per share: Continuing operations $0.55 $0.57 (4)% $1.11 $1.09 2% Discontinued operations 3.16 0.18 1,656 3.21 0.32 903 -------- -------- -------- -------- -------- -------- Net income $3.71 $0.75 395% $4.32 $1.41 206% ======== ======== ======== ======== ======== ======== Weighted average common shares outstanding - diluted 305.3 321.9 (5)% 312.5 323.1 (3)% ======== ======== ======== ======== ======== ======== (1) Tax rate from continuing operations is 25.7% and 34.9% for the second quarters ended June 30, 2008 and 2007, respectively, and 28.0% and 33.2% for the six months ended June 30, 2008 and 2007, respectively. (2) Tax rate from discontinued operations is 32.4% and 34.5% for the second quarters ended June 30, 2008 and 2007, respectively, and 32.7% and 34.4% for the six months ended June 30, 2008 and 2007, respectively. Aon Corporation Revenue from Continuing Operations (Unaudited) Second Quarter Ended --------------------------------------------------------------- Less: Less: Organic Less: Acquisitions, All Revenue June 30, June 30, Percent Currency Divestitures Other Growth (millions) 2008 2007 Change Impact & Transfers (1) (2) ------- ------- ------- ------- ------------ ------- ------- Revenue ------- Risk and Insurance Brokerage Services: Americas $625 $618 1% 2% -% -% (1)% United Kingdom 223 218 2 2 1 (2) 1 Europe, Middle East & Africa 382 307 24 15 - 2 7 Asia Pacific 152 138 10 10 (2) 1 1 Reinsurance brokerage and related services 251 234 7 6 6 (7) 2 ------- ------- ------- ------- ------------ ------- ------- Total Risk and Insurance Brokerage Services 1,633 1,515 8 6 1 (1) 2 ------- ------- ------- ------- ------------ ------- ------- Consulting: Consulting services 279 269 4 4 (1) (2) 3 Outsourcing 57 56 2 1 (1) 2 - ------- ------- ------- ------- ------------ ------- ------- Total Consulting 336 325 3 4 (1) (2) 2 ------- ------- ------- ------- ------------ ------- ------- Unallocated revenue 18 32 (44) N/A N/A N/A N/A Intersegment revenues (7) (6) N/A N/A N/A N/A N/A ------- ------- ------- ------- ------------ ------- ------- Total $1,980 $1,866 6% 5% -% (1)% 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 Revenue from Continuing Operations (Unaudited) Six Months Ended ---------------------------------------------------------------- Less: Less: Organic Less: Acquisitions, All Revenue June 30, June 30, Percent Currency Divestitures Other Growth (millions) 2008 2007 Change Impact & Transfers (1) (2) ------- ------- ------- ------- ------------ ------- ------- Revenue -------- Risk and Insurance Brokerage Services: Americas $1,156 $1,137 2% 2% -% -% -% United Kingdom 384 374 3 2 1 - - Europe, Middle East & Africa 907 741 22 14 1 2 5 Asia Pacific 262 238 10 10 (1) (1) 2 Reinsurance brokerage and related services 515 481 7 6 3 (3) 1 ------- ------- ------- ------- ------------ ------- ------- Total Risk and Insurance Brokerage Services 3,224 2,971 9 6 - 1 2 ------- ------- ------- ------- ------------ ------- ------- Consulting: Consulting services 568 533 7 5 - (2) 4 Outsourcing 111 121 (8) 2 (1) - (9) ------- ------- ------- ------- ------------ ------- ------- Total consulting 679 654 4 4 (1) - 1 ------- ------- ------- ------- ------------ ------- ------- Unallocated revenue 25 55 (55) N/A N/A N/A N/A Intersegment revenues (16) (16) N/A N/A N/A N/A N/A ------- ------- ------- ------- ------------ ------- ------- Total $3,912 $3,664 7% 6% -% (1)% 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 (Unaudited) Risk and Insurance Brokerage Services - Continuing Operations ------------------------------------------------------------- Second Quarter Ended Six Months Ended -------------------------- -------------------------- June 30, June 30, Percent June 30, June 30, Percent (millions) 2008 2007 Change 2008 2007 Change -------- -------- -------- -------- -------- -------- Revenue -------- Commissions, fees and other $1,584 $1,462 8% $3,124 $2,873 9% Investment income 49 53 (8) 100 98 2 -------- -------- -------- -------- -------- -------- Total revenue 1,633 1,515 8 3,224 2,971 9 -------- -------- -------- -------- -------- -------- Expenses --------- Compensation and benefits 933 884 6 1,884 1,724 9 Other general expenses 466 382 22 866 756 15 -------- -------- -------- -------- -------- -------- Total operating expenses 1,399 1,266 11 2,750 2,480 11 -------- -------- -------- -------- -------- -------- Operating income 234 249 (6) 474 491 (3) Other income (1) (29) (97) (5) (29) (83) -------- -------- -------- -------- -------- -------- Income before provision for income tax $235 $278 (15)% $479 $520 (8)% ======== ======== ======== ======== ======== ======== Pretax income margin 14.4% 18.3% 14.9% 17.5% Consulting - Continuing Operations ---------------------------------- Second Quarter Ended Six Months Ended -------------------------- -------------------------- (millions) June 30, June 30, Percent June 30, June 30, Percent 2008 2007 Change 2008 2007 Change -------- -------- -------- -------- -------- -------- Revenue -------- Commissions, fees and other $335 $319 5% $677 $647 5% Investment income 1 6 (83) 2 7 (71) -------- -------- -------- -------- -------- -------- Total revenue 336 325 3 679 654 4 -------- -------- -------- -------- -------- -------- Expenses --------- Compensation and benefits 205 198 4 406 395 3 Other general expenses 89 83 7 168 168 - -------- -------- -------- -------- -------- -------- Total operating expenses 294 281 5 574 563 2 -------- -------- -------- -------- -------- -------- Operating income 42 44 (5) 105 91 15 Other income (1) - N/A (1) - N/A -------- -------- -------- -------- -------- -------- Income before provision for income tax $43 $44 (2)% $106 $91 16% ======== ======== ======== ======== ======== ======== Pretax income margin 12.8% 13.5% 15.6% 13.9% Reconciliation of segment income before provision for income tax to income from continuing operations before provision for income tax: Second Quarter Ended Six Months Ended -------------------------- -------------------------- June 30, June 30, Percent June 30, June 30, Percent (millions) 2008 2007 Change 2008 2007 Change -------- -------- -------- -------- -------- -------- Segment income before provision for income tax Risk and Insurance Brokerage Services $235 $278 (15)% $479 $520 (8)% Consulting 43 44 (2) 106 91 16 -------- -------- -------- -------- -------- -------- Total segment income before provision for income tax 278 322 (14) 585 611 (4) Property & Casualty operations (1) (2) (50) (3) (4) (25) Unallocated investment income 17 29 (41) 22 51 (57) Unallocated expenses (37) (34) 9 (58) (68) (15) Interest expense (31) (34) (9) (64) (69) (7) -------- -------- -------- -------- -------- -------- Income from continuing operations before provision for income tax $226 $281 (20)% $482 $521 (7)% ======== ======== ======== ======== ======== ======== Pretax income margin 11.4% 15.1% 12.3% 14.2% Aon Corporation Reconciliation of the Impact of Non-GAAP Measures on Segments and Diluted Earnings Per Share (Unaudited) (1) Second Quarter Ended Six Months Ended June 30, 2008 June 30, 2008 ------------------------------- ------------------------------- (millions Risk and Risk and except Insurance Unallocated Insurance Unallocated per share Brokerage Cons- Income & Brokerage Cons- Income & data) Services ulting Expense Total Services ulting Expense Total ------- ------- -------- ----- -------- ------- ------- ------ Revenue as reported $1,633 $336 $11 $1,980 $3,224 $679 $9 $3,912 ======= ======= ======= ======= ======= ======= ======= ====== Income (loss) from continuing operations before provision for income tax - as reported $235 $43 $(52) $226 $479 $106 $(103) $482 Restructuring charges 49 4 - 53 106 7 - 113 Anti-bribery and compliance initiatives 11 - - 11 25 - - 25 Gain on sale of land - - - - (5) - - (5) ------- ------- -------- ----- -------- ------- ------- ------ Income (loss) from continuing operations before provision for income tax - as adjusted $295 $47 $(52) 290 $605 $113 $(103) 615 ======= ======= ======= ======= ======= ======= Provision for income taxes 74 172 ----- ------ Income from continuing operations - as adjusted $216 $443 ======= ====== Diluted earnings per share from continuing operations - as adjusted $0.71 $1.42 ======= ====== Weighted average common shares outstanding - diluted 305.3 312.5 ======= ====== Pretax income margins - as adjusted 18.1% 14.0% N/A 14.6% 18.8% 16.6% N/A 15.7% ======= ======= ======= ======= ======= ======= ======= ====== Second Quarter Ended Six Months Ended June 30, 2007 June 30, 2007 -------------------------------- ------------------------------- (millions Risk and Risk and except Insurance Unallocated Insurance Unallocated per share Brokerage Cons- Income & Brokerage Cons- Income & data) Services ulting Expense Total Services ulting Expense Total --------- ------- -------- ----- -------- ------- ------- ------ Revenue as reported $1,515 $325 $26 $1,866 $2,971 $654 $39 $3,664 ======= ======= ======= ======= ======= ======= ======= ====== Income (loss) from continuing operations before provision for income tax - as reported $278 $44 $(41) $281 $520 $91 $(90) $521 Restructuring charges 21 4 - 25 28 6 - 34 Gain on sale of businesses (30) - - (30) (30) - - (30) Reinsurance litigation - - - - 21 - - 21 ------- ------- -------- ----- -------- ------- ------- ------ Income (loss) from continuing operations before provision for income tax - as adjusted $269 $48 $(41) 276 $539 $97 $(90) 546 ======= ======= ======= ======= ======= ======= Provision for income taxes 93 178 ------- ------ Income from continuing operations - as adjusted $183 $368 ======= ====== Diluted earnings per share from continuing operations - as adjusted $0.57 $1.15 ======= ====== Weighted average common shares outstanding - diluted 321.9 323.1 ======= ====== Pretax income margins - as adjusted 17.8% 14.8% N/A 14.8% 18.1% 14.8% N/A 14.9% ======= ======= ======= ======= ======= ======= ======= ====== (1) Certain noteworthy items impacting revenue and pretax income in 2008 and 2007 are described in this schedule. The revenue, income (loss) from continuing operations before provision for income tax, diluted earnings per share from continuing operations and related margins shown with the caption "as adjusted" are non-GAAP measures. Aon Corporation 2007 Restructuring Plan (Unaudited) By Type: Actual Estimated ------------------------------------------- --------- First Second Six Total Quarter Quarter Months Incurred (millions) 2007 2008 2008 2008 to Date Total ------------------------------------------- --------- Workforce reduction (Compensation and benefits) $17 $51 $25 $76 $93 $185 Lease consolidation (Other general expenses) 22 5 13 18 40 95 Asset impairments (Depreciation and amortization) 4 2 12 14 18 52 Other costs associated with restructuring (Other general expenses) 3 2 3 5 8 28 ------------------------------------------- --------- Total restructuring and related expenses $46 $60 $53 $113 $159 $360 =========================================== ========= By Segment: Actual Estimated ------------------------------------------- --------- First Second Six Total Quarter Quarter Months Incurred (millions) 2007 2008 2008 2008 to Date Total ------------------------------------------- --------- Risk and Insurance Brokerage Services $41 $57 $49 $106 $147 $307 Consulting 5 3 4 7 12 53 ------------------------------------------- --------- Total restructuring and related expenses $46 $60 $53 $113 $159 $360 =========================================== ========= Aon Corporation Condensed Consolidated Statements of Financial Position As of --------------------------------- (millions) Jun. 30, 2008 Dec. 31, 2007 (2) --------------------------------------- ------------- ----------------- (Unaudited) ASSETS ------- CURRENT ASSETS Cash $466 $584 Short-term investments 2,566 1,209 Receivables 2,012 2,002 Net fiduciary assets (1) 11,358 9,498 Other current assets 229 292 Assets held for sale - 4,388 ------------- ----------------- Total Current Assets 16,631 17,973 Goodwill 5,137 4,935 Other intangible assets 245 204 Fixed assets, net 483 498 Long-term investments 414 417 Other non-current assets 1,165 921 ------------- ----------------- TOTAL ASSETS $24,075 $24,948 ============= ================= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Net fiduciary liabilities $11,358 $9,498 Short-term debt - 252 Accounts payable and accrued liabilities 1,207 1,418 Other current liabilities 694 360 Liabilities held for sale - 3,025 ------------- ----------------- Total Current Liabilities 13,259 14,553 Long-term debt 2,022 1,893 Pension, post employment and post retirement liabilities 1,296 1,251 Other non-current liabilities 1,043 1,030 ------------- ----------------- TOTAL LIABILITIES 17,620 18,727 TOTAL STOCKHOLDERS' EQUITY 6,455 6,221 ------------- ----------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24,075 $24,948 ============= ================= (1) Includes short-term investments: 2008 - $3,521; 2007 - $3,122. (2) Certain amounts have been reclassified to conform to the 2008 presentation. 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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