Aon Reports 3rd Quarter Earnings; Announces Capital Enhancement Plans; Declares $0.15 Per Share Quarterly Dividend; Provides Future Outlook.Business Editors CHICAGO--(BUSINESS WIRE)--Oct. 31, 2002 Aon Corporation (NYSE NYSE See: New York Stock Exchange :AOC AOC, n an acronym for the Aromatherapy Organizations Council. ) today reported third quarter and nine months 2002 earnings. The Company also announced plans designed to enhance Aon's financial strength and flexibility for the benefit of shareholders, clients and policyholders. Third Quarter Highlights Third quarter 2002 reported earnings increased to $0.46 per share from $0.26 per share in third quarter 2001. Operating segment reported revenues for third quarter were up 17% year-over-year reflecting strong demand for Aon's services and products. Patrick G. Ryan Ryan may refer to: Places
1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. segment had revenue growth of 14%. Buildup build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. costs to support original growth plans for specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. property and casualty underwriting, however, exceeded new revenues and factored into the margin decline. Overall, we are encouraged by the progress we are making - especially our strong new business achievements across many of our businesses." Summary of Other Announcements Aon has decided to enhance its capital position in anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of debt maturities in 2003 and a reduction of stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. due to pension obligations. In addition, the Company has concluded that short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. levels are too high. Mr. Ryan commented, "Maintaining strong credit and claims paying ratings is important to our business. Therefore, we believe it is prudent that we implement capital enhancement plans, including raising equity/equity-linked capital, refinancing Refinancing An extension and/or increase in amount of existing debt. debt and reducing the dividend, in order to reinforce re·in·force v. 1. To give more force or effectiveness to something; strengthen. 2. To reward an individual, especially an experimental subject, with a reinforcer subsequent to a desired response or performance. 3. Aon's financial strength." Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1 billion of capital is expected to be raised of which $500 million to $600 million would be equity/equity-linked securities used to pay down debt and $400 million to $500 million would be debt to replace the same amount of existing debt in order to extend maturities. Aon has decided not to sell, or spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. , its major underwriting subsidiaries due to adverse market conditions for mergers and acquisitions. Separately, Aon expects that pension costs will negatively impact future financial results, similar to other large corporations. 3rd Quarter Segment Review Please note: Beginning with this earnings release, the Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Summary of Operations and Operating Segments schedules have been modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. . In particular, references to income before unusual and special charges/credits, including the related earnings per share impacts, have been deleted Deleted A security that is no longer included on a specified market. Sometimes referred to as "delisted". Notes: Reasons for delisting include violating regulations, failing to meet financial specifications set out by the stock exchange and going bankrupt. from all financial data presented in the earnings schedules. To facilitate comparisons to previous press releases, we have provided a supplemental schedule that reconciles current reporting to prior presentations. Insurance Brokerage and Other Services segment third quarter reported revenue grew 19% to $1.323 billion compared with $1.112 billion in 2001. Organic revenue growth was 18% in the quarter, up from 10% in second quarter 2002, driven by U.S. and international retail, reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. and wholesale brokerage. Core brokerage organic revenue growth was 21% for the third quarter, up from 10% in second quarter 2002. Core brokerage includes worldwide retail, reinsurance, wholesale and specialty brokerage, and managing underwriting and claims businesses. It excludes administration services primarily related to Aon's underwriting businesses. Investment income decreased $6 million to $40 million in the third quarter, primarily due to declining interest rates. Excluding World Trade Center (WTC WTC World Trade Center, see there ) related items, third quarter 2002 brokerage segment pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. increased 20% to $183 million compared with $153 million in third quarter 2001. Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern margins excluding WTC items were 13.8% for 2002 and 2001. Core brokerage margins excluding the WTC related items were 15.4% and 14.5%, respectively, for third quarter 2002 and 2001. Comparable nine months core brokerage results were 14.3% and 17.0%. In third quarter 2002, Aon recorded an $18 million pretax gain ($0.04 per share) for a partial recovery of depreciable depreciable Of, relating to, or being a long-term tangible asset that is subject to depreciation. assets destroyed on September September: see month. 11. The gain represented the difference between insurance recoveries and the net book value of destroyed assets. Aon is continuing the normal process of presenting insurance claims to its property and other insurers for losses related to extra expense, business interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. and other coverages. Significant additional recoveries and gains are expected in future quarters for insurance claims that have been, or will be filed with Aon's property and other insurers. Consulting segment revenue rose 16% to $269 million from $232 million in the year-ago third quarter. This increase primarily reflects organic revenue growth of 15% driven by new outsourcing business. Pretax income was $26 million compared with $29 million in third quarter 2001 and the pretax margin was 9.7% compared with 12.5% in the year ago quarter. The consulting segment is comprised of several major groups: employee benefits, compensation, management consulting Noun 1. management consulting - a service industry that provides advice to those in charge of running a business service industry - an industry that provides services rather than tangible objects , human resource communications and outsourcing. Third quarter results were significantly impacted by sizeable new outsourcing contracts that are expected to provide very favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. returns over the life of the multi-year agreements. The recognition of revenues and expenses, however, will significantly influence financial results over the contract period: -- revenues are recorded on a gross basis, inclusive of amounts ultimately paid to subcontractors, and are recorded ratably over the life of the contract, and -- up-front investment costs to support the new business causes pretax margins to be significantly lower in the early years of the multi-year contracts compared with the later years when margins increase. A significant portion of the up-front up-front or up·front Informal adj. 1. Straightforward; frank. 2. Paid or due in advance: up-front cash. adv. investment costs Those program costs required beyond the development phase to introduce into operational use a new capability; to procure initial, additional, or replacement equipment for operational forces; or to provide for major modifications of an existing capability. incurred for the new outsourcing contracts can be leveraged to handle increased business volume as more accounts are added. Insurance Underwriting segment reported revenue increased 14% to $646 million in third quarter 2002, up from $565 million in third quarter 2001. Organic premium growth primarily from newer accident and health insurance programs drove the increase. Third quarter investment income decreased $15 million from the prior year period, mostly due to reduced interest rates. Insurance Underwriting segment organic revenue growth, based on written premium, was 10% for the third quarter. Excluding WTC related items, third quarter 2002 insurance underwriting pretax income was $41 million compared with $80 million a year ago with pretax margins of 6.3% and 14.2%, respectively. These declines were due in part to staff buildup costs for specialty property and casualty underwriting. The costs related to new resources exceeded specialty property and casualty premiums earned. Aon has decided not to spin-off or sell its major underwriting businesses. They will be operated with a focus on improved profitability. The loss of certain warranty An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party. Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. accounts, the decline in investment income and an increased payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. of benefits compared to net premiums earned contributed to the income and margin declines. Corporate and Other segment revenue was $8 million in the quarter versus $3 million a year ago. The Corporate and Other segment pretax loss pretax loss A loss reported before tax benefits are considered. was $51 million compared with a pretax loss of $76 million in the prior year quarter, due primarily to the elimination of goodwill amortization. General expenses included corporate overhead costs overhead costs see fixed costs. related to the creation of Combined Specialty. In first quarter 2002, Aon adopted Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). (FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). ) Statement No. 142, Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , effective January January: see month. 1, 2002. The amortization of goodwill is no longer included in Aon's reported earnings per share. As previously reported, no impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges resulted from the adoption of Statement No. 142. Goodwill amortization expense was $30 million ($0.10 per share) in third quarter 2001 with no comparable expense in 2002. Review of Consolidated 3rd Quarter and Nine Months Results Consolidated revenue increased 17% to $2.2 billion in the third quarter from $1.9 billion the prior year quarter. Consolidated revenue for nine months 2002 was $6.5 billion, up 14% from $5.6 billion in 2001. The table below shows items that influenced third quarter and nine months results followed by a description of the items.
----------------------------------------------------------------------
Earnings Per Share (EPS) Analysis: credit (charge)
Third Quarter Nine Months
----------------------------------------------------------------------
2002 2001 2002 2001
----- ---- ---- ----
Reported Dilutive EPS $ 0.46 $ 0.26 $ 1.03 $ 0.44
WTC (charges) credits 0.04 (0.12) 0.04 (0.12)
Special charges -
spin off expenses - - (0.02) -
Special (charges)
credits - business
transformation plan - - 0.01 (0.49)
---------- ---------- ---------- --------
EPS before WTC & special
(charges) credits $ 0.42 $ 0.38 $ 1.00 $ 1.05
One-time tax related item - - 0.11 -
Cumulative adjustment -
other than temporary
impairments - - (0.13) -
---------- ---------- ---------- --------
EPS before WTC & special
(charges) credits, tax
item, and cumulative
adjustment $ 0.42 $ 0.38 $ 1.02 $ 1.05
NPS related costs - - (0.08) -
Underwriting segment
non-claim litigation
reserves - - (0.03) -
Corporate & Other segment
revenue excluding tax
item and cumulative
adjustment 0.02 0.01 (0.08) (0.21)
Goodwill amortization - (0.10) - (0.28)
---------- ---------- ---------- --------
EPS before WTC & special
(charges) credits, tax
item, cumulative adjustment,
NPS, underwriting reserves,
Corporate & Other segment
revenue and goodwill
amortization $ 0.40 $ 0.47 $ 1.21 $ 1.54
---------- ---------- ---------- --------
WTC charges/credits and special charges/credits related to the business transformation and spin-off plans factored into the period comparisons. Excluding these items, third quarter 2002 and 2001 dilutive earnings per share were $0.42 and $0.38, respectively, and $1.00 and $1.05 for nine months. Comparisons were also impacted by a favorable $0.11 per share one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. tax item and an unfavorable $0.13 per share cumulative adjustment for other than temporary impairment investment losses for the nine months periods. When further adjusting for these items, nine months dilutive earnings per share were $1.02 and $1.05, respectively, for 2002 and 2001. In addition, nine months 2002 earnings included one-time expense items for losses from an alleged fraud and breach of contract by National Program Services, Inc. (NPS NPS National Park Service NPS Naval Postgraduate School NPS Net Promoter Score (customer management) NPS Non-Point Source pollution NPS Native Plant Society NPS Norfolk Public Schools (Virginia) ) ($0.08 per share) and non-claim litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. reserve items ($0.03 per share). Both of these items were reported in the Insurance Underwriting segment. Balance Sheet Stockholders' equity at September 30, 2002 was approximately $3.7 billion, up from $3.5 billion at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2001. Book value per share at September 30, 2002 increased to approximately $13.60 from $12.82 at December December: see month. 31, 2001. Total debt was $2.182 billion at the end of third quarter 2002 compared with $1.951 billion at the end of 2001. Short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. and fixed maturity investments at September 30, 2002 comprised 88% of Aon's investment portfolio compared with 82% at September 30, 2001. More than 93% of the fixed income securities portfolio are investment grade. Additionally, deposit contract liabilities declined 68% ($564 million) over the past year to $263 million at quarter end. At September 30, 2002, Aon's total debt and preferred securities as a percentage of capital was 45%. Pension Obligation Outlook The decline of worldwide financial markets has negatively impacted the fair value of the assets included in Aon's pension plans. Aon currently estimates that this will cause an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. increase to the minimum pension liability and a commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. reduction in year end stockholders' equity of $450 million to $550 million. Aon measures the pension obligations for the international pension plans using a September 30 measurement date. This non-cash adjustment will not affect 2002 earnings. For 2003, Aon's pension expense is projected to increase by $130 million to $160 million as compared to amounts recorded in 2002. Cash contributions are expected to be $60 million to $90 million for 2003. Decision to Keep Major Insurance Underwriting Businesses When Aon reported second quarter results, the Company announced it was continuing to study alternatives to sell or partially spin-off its underwriting operations. At that time, a prompt sale of all or part of Aon's underwriting operations, at an acceptable price, was believed to be achievable within a reasonable timeframe, especially given unsolicited un·so·lic·it·ed adj. Not looked for or requested; unsought: an unsolicited manuscript; unsolicited opinions. unsolicited Adjective buying interest in the past. While Aon received indications of interest in its underwriting businesses, none were in an acceptable price range due to the unfavorable mergers and acquisitions environment. Proceeds from a sale of such businesses would have allowed Aon to pay down short-term debt but it would have resulted in unacceptable dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. . A spin-off of part of Aon's underwriting operations was also determined to be impractical im·prac·ti·cal adj. 1. Unwise to implement or maintain in practice: Refloating the sunken ship proved impractical because of the great expense. 2. due to capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. . As a result of this decision, Aon will not pursue a specialty property and casualty underwriting strategy. The Company will have costs associated with original build-up build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. plans during the fourth quarter. Aon is supporting the management team in pursuing other opportunities. Common Stock Dividend Declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. Today, Aon's board of directors declared a quarterly cash dividend of $0.15 per share payable to common stockholders of record on November November: see month. 8, 2002. The dividend will be paid on November 20, 2002. Financial Outlook Fourth quarter and full year 2002 earnings per share are expected to be well above average analyst estimates of $0.58 and $1.61, respectively. These expectations exclude a one-time tax gain, a cumulative adjustment for other than temporary impairments, special and unusual WTC charges and credits, and the impact of the capital raising plans announced today. The fourth quarter has historically been the most profitable for Aon's brokerage and consulting segments. It has the highest level of brokerage client policy renewals and it includes the year-end benefits enrollment process for consulting clients. In the fourth quarter, Aon expects double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. organic revenue growth for the brokerage segment driven by strong new business and pretax margins that are anticipated to exceed year ago fourth quarter results of 15%. New outsourcing business will drive strong organic growth in the consulting segment, but will pressure margins compared with prior year. Underwriting segment performance is expected to improve sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen from third quarter, but will continue to be impacted by specialty property and casualty buildup costs and lower investment income due to interest rates. Aon will be reevaluating certain underperforming, non-core underwriting units to improve profitability. In 2003, solid organic revenue growth is expected in Aon's operating segments with improved margins. U.S. retail and managing underwriting within the brokerage segment are projected to have significantly better performance in 2003 versus 2002, and we expect continued profit growth in reinsurance, international and wholesale brokerage. Consulting segment results will be influenced by large multi-year outsourcing contracts signed in mid- mid- pref. Middle: midbrain. 2002 that increase revenue growth but compress margins. Over the life of these multi-year contracts, we expect margins to increase plus Aon can leverage investments already made to add new business. Insurance underwriting results are expected to improve significantly from depressed Depressed A description of a market, security, or product that is experiencing weak demand and lowering prices. Notes: A depressed market, security, or product implies that prices and volume are low. There are many reasons for a depressed market, security, or product. levels in 2002. Improved operating results expected in 2003 will more than offset increased pension costs, and investment income is expected to improve compared with 2002. The Company will host an audio webcast today at 10:00 a.m. (CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. ) that can be accessed at www.aon.com. Aon Corporation (www.aon.com) is a holding company that is comprised of a family of insurance brokerage, consulting and insurance underwriting subsidiaries. This press release may contain certain statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future results, which are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as that term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 the general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, rating agency actions, the cost and availability of financing, the completion, cost and timing of the capital enhancement plan, changes in commercial property and casualty premium rates, the competitive environment, the actual cost of resolution of contingent liabilities Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. and other loss contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. , the ultimate impact of the business transformation plan, and the timing and resolution of related insurance and reinsurance issues relating to the events of September 11, 2001. Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results, are contained in the Company's filings with the Securities and Exchange Commission.
Aon Corporation
Consolidated Summary of Operations
Third Quarter Ended Nine Months Ended
--------------------------- ---------------------------
(millions Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
except per 2002 2001 Change 2002 2001 Change
share data) ------- ------- -------- ------- ------- --------
Revenue
Brokerage
commissions
and fees $1,551 $1,297 20% $4,505 $3,925 15%
Premiums and
other 607 510 19 1,780 1,510 18
Investment
income 88 105 (16) 171 205 (17)
------- ------- -------- ------- ------- --------
Total
revenue 2,246 1,912 17 6,456 5,640 14
------- ------- -------- ------- ------- --------
Expenses
General
expenses(1) 1,652 1,384 19 4,786 4,303 11
Benefits to
policyholders 350 271 29 1,055 823 28
Interest
expense 32 31 3 91 98 (7)
Amortization
of intangible
assets 13 40 (68) 38 118 (68)
Unusual charges
(credits) -
World Trade
Center (18) 53 N/A (18) 53 N/A
------- ------- -------- ------- ------- --------
Total
expenses 2,029 1,779 14 5,952 5,395 10
------- ------- -------- ------- ------- --------
Income Before
Income Tax
and Minority
Interest 217 133 63 504 245 106
Provision for
income tax
(37% in 2002
and 39% in
2001) 79 51 55 186 95 96
------- ------- -------- ------- ------- --------
Income Before
Minority
Interest 138 82 68 318 150 112
Minority
interest
- 8.205% trust
preferred
capital
securities (10) (10) - (30) (30) -
------- ------- -------- ------- ------- --------
Net Income $128 $72 78% $288 $120 140%
======= ======= ======== ======= ======= ========
Preferred stock
dividends (1) (1) - (2) (2) -
------- ------- -------- ------- ------- --------
Net Income
Available
for Common
Stockholders $127 $71 79% $286 $118 142%
======= ======= ======== ======= ======= ========
Net Income Per
Share:
Basic net
income
per share $0.46 $0.26 77% $1.04 $0.44 136%
======= ======= ======== ======= ======= ========
Dilutive net
income per
share $0.46 $0.26 77% $1.03 $0.44 134%
======= ======= ======== ======= ======= ========
Dilutive
average
common and
common
equivalent
shares
outstanding 277.1 275.4 277.2 271.0
======= ======= ======= =======
(1) Includes $8 million in expenses related to the spin-off of the
underwriting business for the nine months ended September 30, 2002
and $6 million of income and $218 million of expenses related to
business transformation for the nine months ended September 30,
2002 and 2001, respectively.
Aon Corporation
Operating Segments
Third Quarter Ended Nine Months Ended
--------------------------- ---------------------------
(millions) Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
2002 2001 Change 2002 2001 Change
------- ------- -------- ------- ------- --------
Revenue
-------
Insurance
brokerage and
other
services(1) $1,323 $1,112 19% $3,847 $3,383 14%
Consulting(2) 269 232 16 750 673 11
Insurance
underwriting 646 565 14 1,901 1,680 13
------- ------- -------- ------- ------- --------
Total
revenue $2,238 $1,909 17% $6,498 $5,736 13%
======== ======== ======= ======== ======== =======
Income Before
Income Tax (3)
-------------
Insurance
brokerage
and other
services $201 $145 39% $530 $349 52%
Consulting 26 29 (10) 76 77 (1)
Insurance
underwriting 41 35 17 103 158 (35)
------- ------- -------- ------- ------- --------
Total income
before income
tax $268 $209 28% $709 $584 21%
======== ======== ======= ======== ======== =======
(1) Includes investment income of $40 million and $46 million for the
third quarter ended September 30, 2002 and 2001, respectively and
$91 million and $127 million for the nine months ended September
30, 2002 and 2001, respectively.
(2) Includes investment income of $0 million and $1 million for the
third quarter ended September 30, 2002 and 2001, respectively, and
$1 million and $4 million for the nine months ended September 30,
2002 and 2001, respectively.
(3) Includes special charges/credits and World Trade Center-related
items. (See Supplemental Reconciliation from Current Presentation
to Prior Reporting Basis).
Aon Corporation
Corporate and Other
Third Quarter Ended Nine Months Ended
--------------------------- ---------------------------
(millions) Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
2002 2001 Change 2002 2001 Change
------- ------- -------- ------- ------- --------
Corporate and
other
revenue(1) $8 $3 167% $(42) $(96) N/A%
-------------
Non operating
expenses
-------------
General
expenses $27 $18 50% $72 $57 26%
Interest
expense 32 31 3 91 98 (7)
Amortization
of goodwill - 30 (100) - 88 (100)
------- ------- -------- ------- ------- --------
Loss before
income tax $(51) $(76) N/A% $(205) $(339) N/A%
======= ======= ======== ======= ======= ========
Third Quarter Ended Nine Months Ended
--------------------------- ---------------------------
(millions) Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
2002 2001 Change 2002 2001 Change
------- ------- -------- ------- ------- --------
(1) Components
of corporate
and other
revenue
--------------
Limited
partnership
investments $- $7 N/A% $14 $(56) N/A%
Income from
marketable
equity
securities
and other
investments 8 2 300 14 6 133
------- ------- -------- ------- ------- --------
Corporate and
other revenue
before one
time items
and loss on
disposals
and related
expenses 8 9 (11) 28 (50) N/A
Interest on tax
refund - - - 48 - N/A
Loss on disposals
and related
expenses(A) - (6) N/A (118) (46) N/A
------- ------- -------- ------- ------- --------
Corporate and
other revenue $8 $3 167% $(42) $(96) N/A%
======= ======= ======== ======= ======= ========
(A) Includes impairment writedowns of $11 million and $1 million for
the third quarter ended September 30, 2002 and 2001, respectively,
and $120 million (including $56 million cumulative effect of the
change in policy for recognizing other than temporary impairments,
of which $5 million pertains to first quarter 2002) and $34
million for the nine months ended September 30, 2002 and 2001,
respectively.
Aon Corporation
Supplemental Reconciliation from Current Presentation to Prior
Reporting Basis
Third Quarter Ended Nine Months Ended
--------------------------- ---------------------------
(millions Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
except per 2002 2001 Change 2002 2001 Change
share data) ------- ------- -------- ------- ------- --------
Income Before
Income Tax
-------------
Insurance
brokerage and
other services
As reported $201 $145 39% $530 $349 52%
Unusual
(credits)
charges -
World Trade
Center (18) 8 N/A (18) 8 N/A
Business
transformation
(credit)
expense - - N/A (6) 187 N/A
------- ------- -------- ------- ------- --------
Prior
reporting
basis $183 $153 20% $506 $544 (7)%
======= ======= ======== ======= ======= ========
Consulting
As reported $26 $29 (10)% $76 $77 (1)%
Business N/A
transformation
expense - - N/A - 7 N/A
------- ------- -------- ------- ------- --------
Prior
reporting
basis $26 $29 (10)% $76 $84 (10)%
======= ======= ======== ======= ======= ========
Insurance
underwriting
As reported $41 $35 17% $103 $158 (35)%
Unusual charges
- World Trade
Center - 45 N/A - 45 N/A
Spin-off
expenses - - N/A 8 - N/A
Business
transformation
expense - - N/A - 24 N/A
------- ------- -------- ------- ------- --------
Prior
reporting
basis $41 $80 (49)% $111 $227 (51)%
======= ======= ======== ======= ======= ========
Operating segments
As reported $268 $209 28% $709 $584 21%
Unusual
(credits)
charges - World
Trade Center (18) 53 N/A (18) 53 N/A
Spin-off
expenses - - N/A 8 - N/A
Business
transformation
(credit)
expense - - N/A (6) 218 N/A
------- ------- -------- ------- ------- --------
Prior
reporting
basis $250 $262 (5)% $693 $855 (19)%
======= ======= ======== ======= ======= ========
Consolidated
As reported $217 $133 63% $504 $245 106%
Unusual
(credits)
charges - World
Trade Center (18) 53 N/A (18) 53 N/A
Spin-off
expenses - - N/A 8 - N/A
Business
transformation
(credit)
expense - - N/A (6) 218 N/A
------- ------- -------- ------- ------- --------
Prior
reporting
basis $199 $186 7% $488 $516 (5)%
======= ======= ======== ======= ======= ========
Dilutive Net
Income
Per Share:
------------
As reported $0.46 $0.26 77% $1.03 $0.44 134%
Unusual
(credits)
charges -
World Trade
Center (0.04) 0.12 N/A (0.04) 0.12 N/A
Spin-off
expenses - - N/A 0.02 - N/A
Business
transformation
(credit)
expense - - N/A (0.01) 0.49 N/A
------- ------- -------- ------- ------- --------
Prior
reporting
basis $0.42 $0.38 11% $1.00 $1.05 (5)%
======= ======= ======== ======= ======= ========
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