AOC Aon Corp.

- Total Revenue was $1.9 billion and EPS from Continuing Operations was $0.51 Second Quarter Highlights - EPS from continuing operations, excluding certain items, increased 9% to $0.76 - Brokerage revenue was $1.6 billion with flat organic growth - Brokerage pretax margin was 13.3% and the adjusted pretax margin, excluding certain items, increased 130 basis points to 19.6% - Consulting revenue was $300 million with a decline in organic revenue of 1% - Consulting pretax margin was 13.7% and the adjusted pretax margin, excluding certain items, increased 100 basis points to 15.0% - Repurchased 3.4 million shares of common stock for $125 million - Completed 500 million Euro offering of 6.25% guaranteed notes due July 1, 2014 CHICAGO, July 30 /PRNewswire-FirstCall/ -- Aon Corporation (NYSE:AOC) today reported results for the second quarter ended June 30, 2009. Net income attributable to Aon stockholders was $149 million or $0.52 per share, compared to $1.1 billion or $3.71 per share for the prior year quarter. The decrease from the prior year quarter relates primarily to the $1.0 billion after-tax gain on the sales of Combined Insurance Companies of America (CICA) and Sterling Life Insurance (Sterling) that was included in the second quarter 2008. Net income attributable to Aon stockholders from continuing operations decreased 11% to $147 million or $0.51 per share, compared to $166 million or $0.54 per share for the prior year quarter. Net income attributable to Aon stockholders from continuing operations per share, excluding certain items, increased 9% to $0.76 compared to $0.70 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 12 of this press release. "Our second quarter results reflect continued progress and a strong performance against difficult economic and industry conditions. Our organic revenue performance was led by four percent organic growth in our industry-leading reinsurance franchise, our total adjusted pretax margin increased 180 basis points, and adjusted earnings per share from continuing operations increased nine percent," said Greg Case, president and chief executive officer, Aon Corporation. "Despite macro-related challenges, we continue to strengthen the underlying foundation of Aon and invest heavily in the fundamental client-serving capabilities of our firm, as the merger with Benfield continues to perform exceptionally well. The 2007 and Aon Benfield restructuring programs are fully on-track and enabling investment in future growth with significant opportunity for margin expansion as we have achieved less than 40% thus far, of the total $492 million of savings we anticipate to realize under these two programs. Lastly, our balance sheet provides significant financial flexibility to effectively allocate capital and deliver long-term shareholder value, as highlighted by the repurchase of $125 million of our common stock in the second quarter." SECOND QUARTER FINANCIAL SUMMARY Total revenue decreased 4% to $1.9 billion due to a 9% decline resulting from foreign currency translation and a 69% decline in investment income, partially offset by a 7% increase from acquisitions, primarily Benfield, net of dispositions. Total operating expenses decreased 3% or $43 million to $1.7 billion, including a $160 million favorable impact from foreign currency translation, partially offset by operating expenses from the Benfield merger and a $42 million increase in restructuring charges. Restructuring expenses related to the 2007 and Aon Benfield restructuring programs were $95 million in the second quarter compared to $53 million in the prior year quarter. An analysis of restructuring-related expenses by segment and type for both the 2007 and Aon Benfield restructuring programs are detailed on page 13 of this release. Restructuring savings in the second quarter related to the 2007 restructuring program are estimated at $52 million compared to $16 million in the prior year quarter. Of the estimated restructuring savings in the second quarter, $45 million were related to the Brokerage segment primarily for workforce reduction. Before any potential reinvestment of savings, the 2007 restructuring program is currently expected to deliver cumulative run-rate cost savings of approximately $240-265 million in 2009 and $370 million in 2010. Restructuring savings in the second quarter related to the Aon Benfield restructuring program are estimated at $10 million. Before any potential reinvestment of savings, the Benfield restructuring program is currently expected to deliver cumulative cost savings of $33-41 million in 2009, $84-94 million in 2010 and $122 million in 2011. Foreign currency translation decreased net income by $0.03 per share compared to the prior year quarter due primarily to fluctuations in the U.S. dollar against most major currencies. Excluding certain items highlighted on page 12 of this press release, the impact of foreign currency translation decreased net income by $0.04 per share ($0.04 per share unfavorable impact in Brokerage, $0.01 per share unfavorable impact in Consulting, partially offset by a $0.01 favorable impact in unallocated expenses). Effective tax rate on continuing operations was 27.1% for the second quarter compared to 25.2% for the prior year quarter. The rate in the second quarter includes an underlying tax rate on operations of 28.0%. The prior year quarter reflected an underlying tax rate on operations of 30.0% and included the favorable resolution of prior year tax issues in the U.K. Average diluted shares outstanding decreased to 289 million in the second quarter compared to 305 million in the prior year quarter, due primarily to the Company's share repurchase program. During the quarter, the Company repurchased 3.4 million shares of common stock for $125 million. As of June 30, the Company had approximately $730 million of remaining share repurchase authorization. Discontinued Operations after-tax income was $2 million or $0.01 per share compared to after-tax income of $967 million or $3.17 per share for the prior year quarter. Discontinued operations include results of the run-off property and casualty insurance operations. The prior year quarter includes the results of Automobile Insurance Specialists (AIS), the run-off property and casualty insurance operations and a $1.0 billion after-tax gain on the sales of CICA and Sterling. SECOND QUARTER SEGMENT REVIEW Certain noteworthy items impacted pretax income and pretax margins in the second quarter of 2009 and 2008. 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 the Impact of Non-GAAP Measures on Segments and Diluted Earnings Per Share" on page 12 of this press release. RISK AND INSURANCE BROKERAGE SERVICES Second Quarter Ended Less: (millions) -------------------- Less: Acquisitions, Organic Commissions, June 30, June 30, % Currency Divestitures, Revenue Fees, Other 2009 2008 Change Impact Other Growth ----------- ---- ---- ------ ------ ----- ------ Americas $574 $588 (2)% (4)% (1)% 3% U.K. 181 214 (15) (14) 4 (5) EMEA 309 364 (15) (14) 2 (3) Asia Pacific 123 147 (16) (14) (1) (1) Reinsurance 372 248 50 (7) 53 4 ---- ---- ---- ---- ---- ---- Sub-Total $1,559 $1,561 -% (9)% 9% -% ------ ------ ---- ---- ---- ---- Investment Income 19 49 (61)% ---- ---- ---- Total Revenue $1,578 $1,610 (2)% ====== ====== ==== Risk and Insurance Brokerage Services total revenue decreased 2% to $1.6 billion compared to the prior year quarter due to a 9% unfavorable impact from foreign currency translation on commissions and fees and a 61% decline in investment income, partially offset by a 9% increase from acquisitions, primarily Benfield, net of dispositions. Americas organic revenue increased 3% reflecting strong new business growth in both U.S. Retail and Latin America. U.K. organic revenue decreased 5% due primarily to weak economic conditions and lower new business. EMEA organic revenue decreased 3% as weak economic conditions in continental Europe offset growth in certain emerging markets. Asia Pacific organic revenue decreased 1% reflecting the impact of exiting certain businesses in Japan, partially offset by modest growth in Australia and certain emerging markets. Reinsurance organic revenue increased 4% due primarily to growth in global treaty and facultative placements. Second Quarter Ended -------------------- (millions) June 30, June 30, % 2009 2008 Change ---- ---- ------ Revenue $1,578 $1,610 (2)% Expenses Compensation and benefits 932 923 1 Other expenses 440 454 (3) ---- ---- ---- Total operating expenses 1,372 1,377 - Operating income $206 $233 (12)% Other (income) expense (4) (1) 300 ---- ---- ---- Pretax income $210 $234 (10)% ==== ==== ==== Pretax margin 13.3% 14.5% Pretax income - adjusted $309 $294 5% Pretax margin - adjusted 19.6% 18.3% Compensation and benefits for the second quarter increased $9 million from the prior year quarter including a $93 million favorable impact from foreign currency translation and benefits related to the restructuring programs, primarily offset by increased operating expenses from the Benfield merger and a $34 million increase in restructuring related costs. Other expenses for the second quarter decreased $14 million from the prior year quarter including a $41 million favorable impact from foreign currency translation and a $10 million decrease related to the reviews under the Foreign Corrupt Practices Act (FCPA) and similar laws in other countries and related compliance initiatives, partially offset by the inclusion of Benfield operating expenses and an $11 million increase in intangible amortization primarily related to the merger with Benfield. The prior year quarter included $20 million of legacy litigation accruals. Second quarter pretax income decreased 10% to $210 million. Adjusting for certain items detailed on page 12 of this press release, pretax income increased 5% or $15 million to $309 million and pretax margin increased 130 basis points to 19.6% versus the prior year quarter due primarily to benefits of the 2007 and Aon Benfield restructuring programs and the inclusion of pretax income from the merger with Benfield, partially offset by a $30 million decrease in investment income and higher intangible amortization expenses. CONSULTING (millions) Second Quarter Ended Less: -------------------- Less: Acquisitions, Organic Commissions, June 30, June 30, % Currency Divestitures, Revenue Fees, Other 2009 2008 Change Impact Other Growth ----------- ---- ---- ------ ------ ----- ------ Services $251 $278 (10)% (9)% -% (1)% Outsourcing 49 57 (14) (11) 1 (4) ---- ---- ---- ---- ---- ---- Sub-Total $300 $335 (10)% (9)% -% (1)% ---- ---- ---- ---- ---- ---- Investment Income - 1 (100)% ---- ---- ---- Total Revenue $300 $336 (11)% ==== ==== ==== Consulting total revenue decreased 11% to $300 million compared to the prior year quarter due primarily to a 9% unfavorable impact from foreign currency translation and a 1% organic decline in commissions and fees revenue. Organic revenue in Consulting Services decreased 1% reflecting a decline in human capital and compensation consulting, partially offset by modest growth in health and benefits consulting. Organic revenue in Outsourcing declined 4% as a previously announced outsourcing contract winds down, partially offset by modest growth in benefits outsourcing. Second Quarter Ended -------------------- (millions) June 30, June 30, % 2009 2008 Change ---- ---- ------ Revenue $300 $336 (11)% Expenses Compensation and benefits 184 205 (10) Other expenses 75 89 (16) ---- ---- ---- Total operating expenses 259 294 (12) Operating income $41 $42 (2)% Other (income) expense - (1) (100) ---- ---- ---- Pretax income $41 $43 (5)% ==== ==== ==== Pretax margin 13.7% 12.8% Pretax income - adjusted $45 $47 (4)% Pretax margin - adjusted 15.0% 14.0% Compensation and benefits for the second quarter decreased 10% or $21 million from the prior year quarter including a $17 million favorable impact from foreign currency translation and benefits related to the 2007 restructuring program. Other expenses decreased 16% or $14 million compared to the prior year quarter due to an $8 million favorable impact from foreign currency translation. Second quarter pretax income decreased 5% to $41 million. Adjusting for certain items detailed on page 12 of this press release, pretax income decreased 4% or $2 million to $45 million and pretax margin increased 100 basis points to 15.0% versus the prior year quarter due primarily to benefits related to the 2007 restructuring program and solid expense discipline. UNALLOCATED INCOME AND EXPENSE Second Quarter Ended -------------------- (millions) June 30, June 30, % 2009 2008 Change ---- ---- ------ Operating segment income before tax $251 $277 (9)% Unallocated investment income & other revenue 13 17 (24) Unallocated expenses (28) (37) (24) Interest expense (26) (31) (16) ---- ---- ---- Income from continuing operations before tax $210 $226 (7)% ==== ==== ==== Unallocated investment income and other revenue for the second quarter decreased $4 million to $13 million compared to the prior year quarter due to a decline in average interest rates and lower cash balances, primarily offset by $10 million of revenue related to the Company's equity ownership in certain insurance investment funds acquired with Benfield. Unallocated expenses decreased $9 million to $28 million versus the prior year quarter, including the recognition of a $5 million gain on the extinguishment of a portion of the Company's trust preferred securities and lower compensation related expenses, partially offset by $6 million of expense related to the Company's equity ownership in certain insurance investment funds acquired with Benfield. Interest expense decreased $5 million to $26 million from the prior year quarter due to fluctuations in foreign currency and a decline in average interest rates on outstanding debt. Conference Call and Webcast Details The Company will host a conference call on Thursday, July 30, 2009 at 7:30 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, and human capital consulting. Through its more than 37,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon's industry-leading global resources and technical expertise are delivered locally through more than 500 offices in more than 120 countries. Named the world's best broker by Euromoney magazine's 2008 and 2009 Insurance Survey, Aon also ranked highest on Business Insurance's listing of the world's largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007 and 2008, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007 and 2008 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, the cost of resolution of other contingent liabilities and loss contingencies, our ability to integrate Benfield successfully and to realize the anticipated benefits of the Benfield merger. 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. The impact of foreign exchange is determined by translating last year's revenue, expense or net income at this year's foreign exchange rates. 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, Vice President, Investor Relations Global Public Relations 312-381-3983 312-381-2485 Aon Corporation Consolidated Summary of Operations (Unaudited) Second Quarter Ended Six Months Ended ---------------------- --------------------- June June June June (millions except per 30, 30, Percent 30, 30, Percent share data) 2009 2008 Change 2009 2008 Change ----- ----- ------- ----- ----- ------- Revenue ------- Commissions, fees and other $1,864 $1,889 (1)% $3,686 $3,737 (1)% Investment income 21 67 (69) 53 124 (57) --- --- --- --- --- --- Total revenue 1,885 1,956 (4) 3,739 3,861 (3) ----- ----- --- ----- ----- --- Expenses -------- Compensation and benefits 1,134 1,143 (1) 2,148 2,297 (6) Other general expenses 466 500 (7) 863 914 (6) Depreciation and amortization 58 58 - 118 108 9 --- --- --- --- --- --- Total operating expenses 1,658 1,701 (3) 3,129 3,319 (6) ----- ----- --- ----- ----- --- Operating income 227 255 (11) 610 542 13 Interest expense 26 31 (16) 55 64 (14) Other (income) expense (9) (2) 350 2 (6) N/A --- --- --- --- --- ----- Income from continuing operations before provision for income tax 210 226 (7) 553 484 14 Provision for income tax (1) 57 57 - 165 133 24 --- --- --- --- --- --- Income from continuing operations 153 169 (9) 388 351 11 --- --- --- --- --- --- Discontinued operations Income from discontinued operations 2 1,431 (100) 93 1,497 (94) Provision for income tax (2) - 464 (100) 41 489 (92) --- --- ---- -- --- --- Income from discontinued operations 2 967 (100) 52 1,008 (95) --- --- ---- -- ----- --- Net income 155 1,136 (86) 440 1,359 (68) Less: Net income attributable to the noncontrolling interests 6 3 100 11 8 38 --- --- --- --- --- --- Net income attributable to Aon stockholders $149 $1,133 (87)% $429 $1,351 (68)% ==== ====== === ==== ====== === Net income attributable to Aon stockholders: Income from continuing operations $147 $166 (11)% $377 $343 10% Income from discontinued operations 2 967 (100) 52 1,008 (95) --- --- ---- --- ----- --- Net income $149 $1,133 (87)% $429 $1,351 (68)% ==== ====== === ==== ====== === Basic net income per share attributable to Aon stockholders (3): Income from continuing operations $0.52 $0.56 (7)% $1.33 $1.13 18% Income from discontinued operations 0.01 3.26 (100) 0.18 3.31 (95) ---- ---- ---- ---- ---- --- Net income $0.53 $3.82 (86)% $1.51 $4.44 (66)% ===== ===== === ===== ===== === Diluted net income per share attributable to Aon stockholders: Income from continuing operations $0.51 $0.54 (6)% $1.30 $1.10 18% Income from discontinued operations 0.01 3.17 (100) 0.18 3.22 (94) ---- ---- ---- ---- ---- --- Net income $0.52 $3.71 (86)% $1.48 $4.32 (66)% ===== ===== === ===== ===== === Weighted average common shares outstanding - diluted 289.1 305.3 (5)% 288.9 312.5 (8)% ===== ===== === ===== ===== === (1) Tax rate for continuing operations is 27.1% and 25.2% for the second quarters ended June 30, 2009 and 2008, respectively, and 29.8% and 27.5% for the six months ended June 30, 2009 and 2008, respectively. The underlying tax rate on continuing operations for 2009 is approximately 28%. (2) Tax rate for discontinued operations is 34.9% and 32.4% for the second quarters ended June 30, 2009 and 2008, respectively, and 44.6% and 32.7% for the six months ended June 30, 2009 and 2008, respectively. (3) In accordance with FSP EITF 03-6-1, the basic and diluted earnings per share calculation was performed using the two-class method and included the impact of certain unvested share-based payment awards that have the right to receive nonforfeitable dividends. Aon Corporation Revenue from Continuing Operations (Unaudited) Second Quarter Ended ----------------------------------------------------- Less: Acqui- Less: sitions, Organic June June Currency Divest- Revenue 30, 30, Percent Impact itures Growth (millions) 2009 2008 Change (1) & Other (2) ---- ---- ------- ------ -------- ------ Commissions, Fees and Other --------------- Risk and Insurance Brokerage Services: Americas $574 $588 (2)% (4)% (1)% 3% United Kingdom 181 214 (15) (14) 4 (5) Europe, Middle East & Africa 309 364 (15) (14) 2 (3) Asia Pacific 123 147 (16) (14) (1) (1) Reinsurance brokerage and related services 372 248 50 (7) 53 4 --- --- --- --- --- --- Total Risk and Insurance Brokerage Services 1,559 1,561 - (9) 9 - ----- ----- --- --- --- --- Consulting: Consulting services 251 278 (10) (9) - (1) Outsourcing 49 57 (14) (11) 1 (4) --- --- --- --- --- --- Total Consulting 300 335 (10) (9) - (1) --- --- --- --- --- --- Total Operating Segments $1,859 $1,896 (2)% (9)% 7% -% ====== ====== === === === === Investment Income ---------- Risk and Insurance Brokerage Services $19 $49 (61)% Consulting - 1 (100) Unallocated 2 17 (88) --- --- --- Total $21 $67 (69)% === === === Total Revenue ------------- Risk and Insurance Brokerage Services $1,578 $1,610 (2)% Consulting 300 336 (11) Unallocated and Other 13 17 (24) Intersegment (6) (7) (14) --- --- --- Total $1,885 $1,956 (4)% ====== ====== === (1) Currency impact is determined by translating last year's revenue at this year's foreign exchange rates. (2) Organic revenue growth excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items. Aon Corporation Revenue from Continuing Operations (Unaudited) Six Months Ended --------------------------------------------------------- Less: Acqui- Less: sitions, Organic June June Currency Divest- Revenue 30, 30, Percent Impact itures Growth (millions) 2009 2008 Change (1) & Other (2) ------ ----- --------- ------- -------- ------- Commissions, Fees and Other ------------ Risk and Insurance Brokerage Services: Americas $1,051 $1,081 (3)% (4)% (1)% 2% United Kingdom 297 364 (18) (16) 3 (5) Europe, Middle East & Africa 757 874 (13) (13) 1 (1) Asia Pacific 207 253 (18) (16) (1) (1) Reinsurance brokerage and related services 767 504 52 (7) 57 2 --- --- --- --- --- --- Total Risk and Insurance Brokerage Services 3,079 3,076 - (10) 10 - ----- ----- --- --- --- --- Consulting: Consulting services 514 566 (9) (9) (1) 1 Outsourcing 94 111 (15) (12) 1 (4) --- --- --- --- --- --- Total Consulting 608 677 (10) (10) - - --- --- --- --- --- --- Total Operating Segments $3,687 $3,753 (2)% (10)% 8% -% ====== ====== === === === === Investment Income ---------- Risk and Insurance Brokerage Services $49 $100 (51)% Consulting 1 2 (50) Unallocated 3 22 (86) --- --- --- Total $53 $124 (57)% === ==== === Total Revenue -------- Risk and Insurance Brokerage Services $3,128 $3,176 (2)% Consulting 609 679 (10) Unallocated and Other 14 22 (36) Intersegment (12) (16) (25) --- --- --- Total $3,739 $3,861 (3)% ====== ====== === (1) Currency impact is determined by translating last year's revenue at this year's foreign exchange rates. (2) Organic revenue growth excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items. Aon Corporation - Segments (Unaudited) Risk and Insurance Brokerage Services - Continuing Operations ------------------------------------------------------------- Second Quarter Ended Six Months Ended ------------------------ ------------------------ June June June June 30, 30, Percent 30, 30, Percent (millions) 2009 2008 Change 2009 2008 Change ------- ------- -------- ------- ------- ------- Revenue ------- Commissions, fees and other $1,559 $1,561 -% $3,079 $3,076 -% Investment income 19 49 (61) 49 100 (51) --- --- --- --- --- --- Total revenue 1,578 1,610 (2) 3,128 3,176 (2) ----- ----- --- ----- ----- --- Expenses -------- Compensation and benefits 932 923 1 1,769 1,863 (5) Other general expenses 440 454 (3) 814 841 (3) --- --- --- --- --- -- Total operating expenses 1,372 1,377 - 2,583 2,704 (4) ----- ----- --- ----- ----- --- Operating income 206 233 (12) 545 472 15 Other expense (income) (4) (1) 300 7 (5) N/A --- --- --- --- --- ----- Income before provision for income tax $210 $234 (10)% $538 $477 13% ==== ==== === ==== ==== === Pretax income margin 13.3% 14.5% 17.2% 15.0% Consulting - Continuing Operations Second Quarter Ended Six Months Ended ------------ ------------------------ ------------------------ June June June June 30, 30, Percent 30, 30, Percent (millions) 2009 2008 Change 2009 2008 Change ------- ------- -------- ------- ------- ------- Revenue ------- Commissions, fees and other $300 $335 (10)% $608 $677 (10)% Investment income - 1 (100) 1 2 (50) --- --- ---- --- --- --- Total revenue 300 336 (11) 609 679 (10) --- --- --- --- --- --- Expenses -------- Compensation and benefits 184 205 (10) 346 406 (15) Other general expenses 75 89 (16) 152 168 (10) --- --- --- --- --- --- Total operating expenses 259 294 (12) 498 574 (13) --- --- --- --- --- --- Operating income 41 42 (2) 111 105 6 Other expense (income) - (1) (100) - (1) (100) --- --- ---- --- --- ---- Income before provision for income tax $41 $43 (5)% $111 $106 5% === === === ==== ==== === Pretax income margin 13.7% 12.8% 18.2% 15.6% 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 June June June 30, 30, Percent 30, 30, Percent (millions) 2009 2008 Change 2009 2008 Change ------- ------- -------- ------- ------- ------- Segment income before provision for income tax Risk and Insurance Brokerage Services $210 $234 (10)% $538 $477 13% Consulting 41 43 (5) 111 106 5 --- --- --- --- --- --- Total segment income before provision for income tax 251 277 (9) 649 583 11 Unallocated investment income and other revenue 13 17 (24) 14 22 (36) Unallocated expenses (28) (37) (24) (55) (57) (4) Interest expense (26) (31) (16) (55) (64) (14) --- --- --- --- --- --- Income from continuing operations before provision for income tax $210 $226 (7)% $553 $484 14% ==== ==== === ==== ==== === Pretax income margin 11.1% 11.6% 14.8% 12.5% Aon Corporation Reconciliation of the Impact of Non-GAAP Measures on Segments and Diluted Earnings Per Share (Unaudited) (1) Second Quarter Ended June 30, 2009 ---------------------------------------------- Risk and Insurance Unallocated (millions except Brokerage Income & per share data) Services Consulting Expense Total ---------- ---------- ------------ ----- Revenue as reported $1,578 $300 $7 $1,885 ====== ==== === ====== Income (loss) from continuing operations before provision for income tax - as reported $210 $41 $(41) $210 Restructuring charges (Aon Benfield and 2007 plan) 92 3 - 95 Pension curtailment 4 1 - 5 Anti-bribery and compliance initiatives 1 - - 1 Benfield integration costs 2 - - 2 --- --- --- --- Income (loss) from continuing operations before provision for income tax -as adjusted $309 $45 $(41) 313 ==== === ==== Provision for income taxes (2) 86 --- Income from continuing operations - as adjusted 227 Less: Net income attributable to noncontrolling interests 6 --- Income from continuing operations - as adjusted $221 ==== Diluted earnings per share from continuing operations -as adjusted $0.76 ===== Weighted average common shares outstanding - diluted 289.1 ===== Pretax income margins - as adjusted 19.6% 15.0% N/A 16.6% ==== ==== === ==== Second Quarter Ended June 30, 2008 ---------------------------------------------- Risk and Insurance Unallocated (millions except Brokerage Income & per share data) Services Consulting Expense Total ---------- ---------- ------------ ----- Revenue as reported $1,610 $336 $10 $1,956 ====== ==== === ====== Income (loss) from continuing operations before provision for income tax -as reported $234 $43 $(51) $226 Restructuring charges (2007 plan) 49 4 - 53 Anti-bribery and compliance initiatives 11 - - 11 Gain on sale of land - - - - --- --- --- --- Income (loss) from continuing operations before provision for income tax -as adjusted $294 $47 $(51) 290 ==== === ==== Provision for income taxes (2) 73 -- Income from continuing operations - as adjusted 217 Less: Net income attributable to noncontrolling interests 3 --- Income from continuing operations - as adjusted $214 ==== Diluted earnings per share from continuing operations -as adjusted $0.70 ===== Weighted average common shares outstanding - diluted 305.3 ===== Pretax income margins - as adjusted 18.3% 14.0% N/A 14.8% ==== ==== === ==== Six Months Ended June 30, 2009 ---------------------------------------------- Risk and Insurance Unallocated (millions except Brokerage Income & per share data) Services Consulting Expense Total ---------- ---------- ------------ ----- Revenue as reported $3,128 $609 $2 $3,739 ====== ==== === ====== Income (loss) from continuing operations before provision for income tax -as reported $538 $111 $(96) $553 Restructuring charges (Aon Benfield and 2007 plan) 132 6 - 138 Pension curtailment (54) (20) (4) (78) Anti-bribery and compliance initiatives 2 - - 2 Benfield integration costs 12 - - 12 -- --- --- --- Income (loss) from continuing operations before provision for income tax -as adjusted $630 $97 $(100) 627 ==== === ===== Provision for income taxes (2) 176 --- Income from continuing operations - as adjusted 451 Less: Net income attributable to noncontrolling interests 11 --- Income from continuing operations - as adjusted $440 ==== Diluted earnings per share from continuing operations -as adjusted $1.52 ===== Weighted average common shares outstanding - diluted 288.9 ===== Pretax income margins - as adjusted 20.1% 15.9% N/A 16.8% ==== ==== === ==== Six Months Ended June 30, 2008 ---------------------------------------------- Risk and Insurance Unallocated (millions except Brokerage Income & per share data) Services Consulting Expense Total ---------- ---------- ------------ ----- Revenue as reported $3,176 $679 $6 $3,861 ====== ==== === ====== Income (loss) from continuing operations before provision for income tax -as reported $477 $106 $(99) $484 Restructuring charges (2007 plan) 106 7 - 113 Anti-bribery and compliance initiatives 25 - - 25 Gain on sale of land (5) - - (5) --- --- --- --- Income (loss) from continuing operations before provision for income tax -as adjusted $603 $113 $(99) 617 ==== ==== ==== Provision for income taxes (2) 170 --- Income from continuing operations - as adjusted 447 Less: Net income attributable to noncontrolling interests 8 --- Income from continuing operations - as adjusted $439 ==== Diluted earnings per share from continuing operations -as adjusted $1.40 ===== Weighted average common shares outstanding - diluted 312.5 ===== Pretax income margins - as adjusted 19.0% 16.6% N/A 16.0% ==== ==== === ==== (1) Certain noteworthy items impacting pretax income in 2009 and 2008 are described in this schedule. The 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. (2) Tax rate for continuing operations is 27.1% and 25.2% for the second quarters ended June 30, 2009 and 2008, respectively, and 28.0% and 27.6% for the six months ended June 30, 2009 and 2008, respectively. Aon Corporation - Restructuring Plans (Unaudited) (1) 2007 Restructuring Plan By Type: Actual --------------------------------------------- Full Full Second Six Total Year Year Quarter Months Incurred Estimated (millions) 2007 2008 2009 2009 to Date Total ------ ----- -------- ------- --------- ----------- Workforce reduction $17 $166 $43 $70 $253 $330 Lease consolidation 22 38 22 27 87 134 Asset impairments 4 18 4 4 26 40 Other costs associated with restructuring 3 29 5 7 39 46 --- --- --- --- --- --- Total restructuring and related expenses $46 $251 $74 $108 $405 $550 === ==== === ==== ==== ==== By Segment: Risk and Insurance Brokerage Services $41 $234 $71 $102 $377 $504 Consulting 5 17 3 6 28 46 --- --- --- --- --- --- Total restructuring and related expenses $46 $251 $74 $108 $405 $550 === ==== === ==== ==== ==== Benfield Restructuring Plan By Type: Operations ---------------- Purchase Price Second Six Allocation Quarter Months Estimated (millions) (2) 2009 2009 Total ----------- -------- ------- --------- Workforce reduction $74 $17 $25 $126 Lease consolidation 28 4 4 48 Asset impairments - - 1 8 Other costs associated with restructuring 2 - - 3 --- --- --- --- Total restructuring and related expenses $104 $21 $30 $185 ==== === === ==== (1) In the Consolidated Summary of Operations, workforce reductions are included in "Compensation and benefits," lease consolidations and other costs associated with restructuring are included in "Other general expenses," and asset impairments are included in "Depreciation and amortization." (2) Represents estimated liabilities to be incurred within one year of the acquisition date (11/30/08). Any excess liabilities will be reversed if obligations are settled for less than expected. Aon Corporation Condensed Consolidated Statements of Financial Position As of ------------------------------- (millions) Jun. 30, 2009 Dec. 31, 2008 (2) ------------- ----------------- (Unaudited) ASSETS -------- CURRENT ASSETS Cash and cash equivalents $537 $582 Short-term investments 580 684 Receivables 1,937 1,990 Fiduciary assets (1) 12,323 10,678 Other current assets 315 355 Assets held for sale 189 237 --- --- Total Current Assets 15,881 14,526 Goodwill 5,883 5,637 Other intangible assets 776 779 Fixed assets, net 447 451 Investments 296 332 Other non-current assets 1,155 1,215 ----- ----- TOTAL ASSETS $24,438 $22,940 ======= ======= LIABILITIES -------------- CURRENT LIABILITIES Fiduciary liabilities $12,323 $10,678 Short-term debt 681 105 Accounts payable and accrued liabilities 1,392 1,560 Other current liabilities 345 314 Liabilities held for sale 118 146 --- --- Total Current Liabilities 14,859 12,803 Long-term debt 1,249 1,872 Pension, post employment and post retirement liabilities 1,303 1,694 Other non-current liabilities 1,019 1,156 --- ----- TOTAL LIABILITIES 18,430 17,525 ------ ------ TOTAL STOCKHOLDERS' EQUITY 5,866 5,310 Noncontrolling interest 142 105 --- --- TOTAL EQUITY 6,008 5,415 ----- ----- TOTAL LIABILITIES AND EQUITY $24,438 $22,940 ======= ======= (1) Includes short-term investments: 2009 - $3,694; 2008 - $3,178. (2) Certain amounts have been reclassified to conform to the 2009 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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