Aon Reports 4th Quarter and Full Year 2002 Results.Business Editors CHICAGO--(BUSINESS WIRE)--Feb. 12, 2003 Aon Corporation (NYSE NYSE See: New York Stock Exchange :AOC AOC, n an acronym for the Aromatherapy Organizations Council. ) today reported fourth quarter and full year 2002 earnings. Fourth Quarter and Full Year Highlights Earnings per share for the fourth quarter increased to $0.59 from $0.10 one year ago. Full year 2002 earnings increased to $1.64 per share from $0.53 per share. Current and prior year periods were impacted by the World Trade Center (WTC WTC World Trade Center, see there ) disaster and other factors. An analysis of earnings per share showing certain items that impacted current and prior period results is provided below. Strong demand for Aon's services and products and an increase in 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: investment income drove fourth quarter revenues up 16% and full year revenues up 15%. Patrick G. Ryan Ryan may refer to: Places
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. . While our 2002 performance improved, we did not reach our original targets for the year, due in part to some non-recurring items. Our fundamental businesses remain strong, however, and as we address underperformance in certain units and improve expense management, we expect earnings to increase in 2003." Mr. Ryan added, "Looking back at 2002, I am extremely proud of Aon's employees for the way they came together after the tragedy of September September: see month. 11. They have done an outstanding job recovering from the World Trade Center disaster while helping our clients to rebuild. We continue to remember our employees and their families, as well as clients and friends whom we lost." Fourth Quarter Segment Review Pretax income and pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern margins below exclude unusual WTC charges/credits as reflected in the attached supplemental schedule. Insurance Brokerage and Other Services segment fourth quarter 2002 reported revenue grew 11% to $1.416 billion. Organic revenue growth was 9% for the segment and 10% for core brokerage. Full year 2002 organic revenue growth was 13% for core brokerage. Core brokerage includes worldwide 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. , wholesale and specialty brokerage, plus managing underwriting Underwriting 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. and claims services. It excludes administration services primarily related to Aon's underwriting businesses. Prior year fourth quarter results included a $24 million fee earned in connection with the formation of Endurance Endurance See also Longevity. Atalanta feminine name denotes power of endurance. [Gk. Myth.: Jobes, 148] Boston marathon famous 26-mile race held annually for long-distance runners. [Am. Pop. Culture: Misc. Specialty. Adjusting for this item, core organic revenue growth was 12% for fourth quarter and 14% for full year 2002. Investment income decreased 24% to $22 million, due primarily to declining interest rates. Pretax income increased 17% to $222 million. Pretax margins expanded to 15.7% from 14.9% a year ago, and core brokerage margins improved to 17.7% from 16.2%. Adjusting for the large Endurance fee in fourth quarter 2001, the core brokerage pretax margin expanded more than 300 basis points to 17.7% from 14.5%. Reinsurance, international and wholesale brokerage had very good results. U.S. retail brokerage showed continued improvement from the prior year and managing underwriting increased production relative to slower first half 2002 results when an insurance carrier had to be switched for some major programs. Fourth quarter 2001 results included $12 million of transition costs related to the business transformation. In fourth quarter 2002, Aon received a reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. from its property insurers for depreciable depreciable Of, relating to, or being a long-term tangible asset that is subject to depreciation. assets destroyed on September 11. An $11 million pretax credit was recognized, which represented the difference between insurance recoveries and the net book value of destroyed assets. WTC credits, as well as charges in the prior year period, were excluded from the segment comparisons noted above. Aon is continuing the normal process of presenting insurance claims to its 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. Additional reimbursements are expected in future quarters for claims that have been or will be filed under insurance policies purchased by Aon from independent insurers. Consulting segment revenue rose 15% to $304 million in the quarter. This increase reflects organic revenue growth of 12% driven mostly by new outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. business initiated in third quarter 2002, and good growth in Continental Europe Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands and, at times, peninsulas. and the Pacific region. The deferment deferment Delaying of an obligation. See Default, Medical student debt. Cf Forbearance. of discretionary projects by clients and sluggish global economies limited growth in the quarter. Pretax income was $44 million compared with $49 million one year ago. The pretax margin was 14.5% compared with 18.5% in fourth quarter 2001. The increasing mix of lower margin outsourcing revenues was the principal factor compressing com·press tr.v. com·pressed, com·press·ing, com·press·es 1. To press together: compressed her lips. 2. To make more compact by or as if by pressing. 3. margins. As in third quarter 2002, the fourth quarter margin was significantly impacted by a sizeable new outsourcing contract added in July July: see month. 2002 that is expected to provide 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 agreement. 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 inclusive of prep. Taking into consideration or account; including. amounts ultimately passed through to subcontractors, and are recorded ratably over the life of the contract. Also, 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. to support the new business cause pretax margins to be significantly lower in the early years of the multi-year contract, compared with the later years when margins increase. A significant portion of the up-front investment costs incurred for the new outsourcing contracts can be leveraged to handle increased business volume. Insurance Underwriting segment revenue increased 10% to $625 million in fourth quarter 2002 driven mostly by accident and health insurance premium growth. Investment income decreased $16 million. Pretax income was $49 million compared with $82 million in fourth quarter 2001. Pretax margins were 7.8% and 14.4%, respectively. In 2002, Aon decided that it will discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: certain unprofitable underwriting units, including accident and health insurance underwriting in Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. and Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. , and large company group life business. Losses and other costs attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to these businesses in 2002 were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $13 million pretax ($0.03 per share) in the quarter and $21 million pretax ($0.05 per share) for the year. We expect to fully discontinue these businesses in 2003. During 2002, Aon also incurred costs associated with its prior 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. plans and related items that will not be pursued. Total costs for this initiative were approximately $14 million pretax ($0.03 per share) for the quarter and $50 million pretax ($0.11 per share) for 2002. Of these amounts, approximately $8 million pretax ($0.02 per share) was reflected in the quarter and $33 million pretax ($0.07 per share) for the year in the underwriting segment. The remaining $17 million pretax ($0.04 per share) of spin-off plan costs in 2002 were recorded in the Corporate and Other segment, including $6 million pretax ($0.01 per share) in the fourth quarter. These costs included staff 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. and severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs, corporate overhead, advisory fees and costs tied to an anticipated (now abandoned) expansion of certain specialty property and casualty underwriting. Corporate and Other segment revenue of $21 million improved significantly from a loss of $75 million a year ago when unfavorable equity markets negatively impacted results. Corporate and Other segment revenue is derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. primarily from equity related securities including investment income from the Company's ownership interest in Endurance Specialty. The Corporate and Other segment pretax loss pretax loss A loss reported before tax benefits are considered. was $37 million compared with a pretax loss of $152 million in the prior year quarter, due primarily to the revenue improvement and the elimination of goodwill amortization. As noted above, general expenses included corporate overhead costs overhead costs see fixed costs. related to the spin-off plans. 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. Goodwill amortization expense was $30 million ($0.10 per share) in fourth quarter 2001 and $118 million ($0.38 per share) for the full year 2001 with no comparable expense in 2002. Review of Consolidated 4th Quarter and Twelve Months Results The table below shows certain items that influenced fourth quarter and full year results.
Earnings Per Share (EPS) Analysis:
credit (charge) Fourth Quarter Twelve Months
--------------------------------------- -------------- --------------
2002 2001 2002 2001
------ ------ ------ ------
Reported Dilutive EPS $0.59 $0.10 $1.64 $0.53
WTC (charges) credits 0.02 (0.23) 0.06 (0.35)
Special charges - spin off expenses - - (0.02) -
Special (charges) credits - business
transformation plan - - 0.01 (0.49)
One-time tax related item - - 0.11 -
Cumulative adjustment - other than
temporary impairments - - (0.11) -
NPS related costs - - (0.08) -
Underwriting segment non-claim
litigation reserves - - (0.03) -
Losses and other costs for certain
insurance underwriting units
being discontinued (0.03) - (0.05) -
Additional spin-off plan and related
expenses not reflected
as special charges (0.03) - (0.09) -
Corporate & Other segment revenue
excluding tax item and
cumulative adjustment noted above 0.04 (0.17) (0.04) (0.38)
Goodwill amortization - (0.10) - (0.38)
------ ------ ------ -------
WTC charges/credits and special charges/credits related to the business transformation and spin-off plans factored into the period comparisons. Excluding these items, fourth quarter 2002 and 2001 dilutive earnings per share were $0.57 and $0.33, respectively, and $1.59 and $1.37 for the year. For the full year, 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 $0.11 per share cumulative adjustment for other than temporary 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. investment losses related to prior years. Within the Insurance Underwriting segment, 2002 earnings also 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) ) 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. In addition, there were losses and other costs related to certain underwriting units noted above, and spin-off plan costs. Corporate and Other segment revenue was negative $21 million for 2002 versus a negative $171 million for 2001. In 2002, gross impairment writedowns were $130 million (including $51 million, or $0.11 per share, for the cumulative adjustment noted above) compared with $57 million in 2001. Amortization of other intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. in 2002 equaled $16 million ($0.03 per share) for the fourth quarter and $54 million ($0.12 per share) for the full year. Comparable amounts for 2001 were $10 million ($0.02 per share) and $40 million ($0.09 per share), respectively. Amortization of intangibles is included in operating segment results. After netting the effect of currency hedges Currency hedge Applies mainly to international equities. Hedging technique to guard against foreign exchange fluctuations (i.e., short Euro l00 mm when holding a long position of Euro l00 mm in stocks). , the impact of foreign currency translations on net income in fourth quarter and full year 2002 is not material. Financial Strength Highlights As previously reported, Aon implemented a capital enhancement plan during the fourth quarter to improve its capital position and 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. credit ratings in light of increased pension obligations, cash outlays Outlays Payments on obligations in the form of cash, checks, the issuance of bonds or notes, or the maturing of interest coupons. related to September 11 and other factors. Net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of $607 million from the issuance of 36.8 million shares of new common equity were used to reduce commercial paper outstanding of $595 million at September 30, 2002 and other short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. . 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. was reduced by $552 million during the fourth quarter, as anticipated, due to an increase in pension obligations. This non-cash adjustment to stockholders' equity did not impact 2002 earnings. Debt of $525 million was also issued, principally to retire near-term near-term adj. Of, for, or involving a short period of time in the near future. debt and approximately $98 million of the Company's trust preferred capital securities, during the quarter. In addition, notes that matured in January 2003 equaling $150 million were retired using a portion of the proceeds. Beginning first quarter 2003, minority interest on the capital securities will be approximately $9 million per quarter. Total debt was approximately $1.8 billion at December December: see month. 31, 2002, down from $2.2 billion at September 30, 2002. Commercial paper outstanding declined to $1 million from $595 million over the same time period. 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 December 31, 2002 comprised approximately 90% of Aon's investment portfolio compared with 83% at December 31, 2001. Nearly 94% of the fixed income securities portfolio is investment grade. Stockholders' equity was approximately $3.9 billion at December 31, 2002, 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. At December 31, 2002, Aon's total debt and preferred securities as a percentage of total capital was approximately 40% compared to 45% at both September 30, 2002 and December 31, 2001. Aon's senior debt is rated "A-" by Standard and Poor's Noun 1. Standard and Poor's - a broadly based stock market index Standard and Poor's Index and Fitch fitch: see polecat. , and Baa2 by Moody's Moody's Corporation (NYSE: MCO) is the holding company for Moody's Investors Service which performs financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized ratings scale. . Aon's principal insurance underwriting subsidiaries are rated "A" by A.M. Best for their claims paying ability. Future Outlook As earlier reported, pension costs will increase in 2003 due largely to the negative impact of depressed worldwide equity markets on pension investment valuations. For 2003, pretax pension costs are expected to increase approximately $130 million. The higher costs are expected to be more than offset by increased operating segment income and improved Corporate and Other segment revenue. Incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. cash contributions related to the increased pension obligations are anticipated to be about $40 million. Mr. Ryan said, "2002 was a difficult year for Aon as we recovered from the negative effects of the World Trade Center disaster. The tragedy occurred in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of our business transformation rollout, and therefore, our employees had to manage the challenge of coping with significant internal change compounded by the external shock of September 11. While the memory of the World Trade Center will never leave us, the negative influences of the event on our business should wane substantially in the coming year. While we have settled claims for our physical property, we incurred significant extra expenses and had sizeable business interruption losses that have yet to be reimbursed by our insurers. We continue to pursue the normal claims process and we expect to recognize these recoveries in the quarters ahead." In 2003, solid organic revenue and income growth are anticipated for Aon's total operating segments. U.S. retail and managing underwriting within the brokerage segment are expected to have significantly better performance in 2003, and we believe reinsurance, international and wholesale brokerage will continue to grow their income. Consulting segment revenues will be driven by the large multi-year outsourcing contracts signed in mid- mid- pref. Middle: midbrain. 2002. The Company also expects to benefit from client demand for solutions that improve workforce productivity and maximize employee benefits spending. Insurance Underwriting results are expected to increase significantly from low levels in 2002 caused mostly by the unusual items noted above. Certain unprofitable units are being sold or exited and resources will be refocused on increasing profitability. Corporate and Other segment revenues were negatively impacted by $130 million of gross impairment writedowns to investments in 2002, due in part to a $51 million cumulative adjustment. Fixed income and short-term securities now comprise To embrace, cover, or include; to confine within; to consist of. In the law governing patents—grants of an exclusive right or privilege to make, use, or sell an invention or product for a term of years—the term comprise a larger percentage of the investment portfolio versus one year ago as noted above. Mr. Ryan added, "A majority of the analysts that cover Aon currently estimate our earnings to be between $1.90 and $2.00 per share for 2003. Based upon what we know now, we are comfortable with that range." 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, exchange rates, rating agency actions, pension funding, changes in commercial property and casualty markets and commercial 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
Fourth Quarter Ended Twelve Months Ended
--------------------------- ---------------------------
(millions except
per share
data) Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
2002 2001 Change 2002 2001 Change
------- ------- -------- ------- ------- --------
(Restated) (Restated)
Revenue
Brokerage
commissions
and fees $ 1,697 $ 1,511 12% $ 6,202 $ 5,436 14%
Premiums and
other 588 517 14 2,368 2,027 17
Investment
income 81 8 +500 252 213 18
------- ------- -------- ------- ------- --------
Total
revenue 2,366 2,036 16 8,822 7,676 15
------- ------- -------- ------- ------- --------
Expenses
General
expenses(1) 1,719 1,510 14 6,505 5,813 12
Benefits to
policyholders 320 288 11 1,375 1,111 24
Interest
expense 33 29 14 124 127 (2)
Amortization
of intangible
assets 16 40 (60) 54 158 (66)
Unusual
charges
(credits) -
World Trade
Center (11) 105 N/A (29) 158 N/A
------- ------- -------- ------- ------- --------
Total
expenses 2,077 1,972 5 8,029 7,367 9
------- ------- -------- ------- ------- --------
Income Before
Income Tax and
Minority
Interest 289 64 352 793 309 157
Provision for
income tax
(37% in 2002
and 39% in
2001) 107 27 296 293 122 140
------- ------- -------- ------- ------- --------
Income Before
Minority
Interest 182 37 392 500 187 167
Minority
interest -
8.205% trust
preferred
capital
securities (4) (10) N/A (34) (40) N/A
------- ------- -------- ------- ------- --------
Net Income $ 178 $ 27 +500% $ 466 $ 147 217%
======= ======= ======== ======= ======= ========
Preferred
stock
dividends (1) (1) - (3) (3) -
------- ------- -------- ------- ------- --------
Net Income
Available for
Common
Stockholders $ 177 $ 26 +500% $ 463 $ 144 222%
======= ======= ======== ======= ======= ========
Net Income Per
Share:
Basic net
income per
share $ 0.59 $ 0.10 490% $ 1.65 $ 0.54 206%
======= ======= ======== ======= ======= ========
Dilutive net
income per
share $ 0.59 $ 0.10 490% $ 1.64 $ 0.53 209%
======= ======= ======== ======= ======= ========
Dilutive
average
common and
common
equivalent
shares
outstanding 299.0 276.9 282.6 272.4
======= ======= ======= =======
Fourth quarter and twelve months 2001 were restated to establish an
allowance for a potentially uncollectible reinsurance receivable,
originally recorded in the first quarter of 2002.
(1) Includes $8 million in advisory expenses related to the
previously planned divestiture of the underwriting business for
the twelve months ended December 31, 2002 and $6 million of income
and $218 million of expenses related to business transformation
for the twelve months ended December 31, 2002 and 2001,
respectively.
Aon Corporation
Operating Segments
Fourth Quarter Ended Twelve Months Ended
--------------------------- ---------------------------
(millions) Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
2002 2001 Change 2002 2001 Change
------- ------- -------- ------- ------- --------
(Restated) (Restated)
Revenue
-------
Insurance
brokerage and
other
services(1) $ 1,416 $ 1,276 11% $ 5,263 $ 4,659 13%
Consulting(2) 304 265 15 1,054 938 12
Insurance
underwriting 625 570 10 2,526 2,250 12
------- ------- -------- ------- ------- --------
Total
revenue $ 2,345 $ 2,111 11% $ 8,843 $ 7,847 13%
======= ======= ======== ======= ======= ========
Income Before
Income Tax
-------------
Insurance
brokerage
and other
services(3) $ 233 $ 175 33% $ 763 $ 524 46%
Consulting(4) 44 49 (10) 120 126 (5)
Insurance
underwriting(5) 49 (8) N/A 152 150 1
------- ------- -------- ------- ------- --------
Total income
before income
tax $ 326 $ 216 51% $ 1,035 $ 800 29%
======= ======= ======== ======= ======= ========
(1) Includes investment income of $22 million and $29 million for the
fourth quarters ended December 31, 2002 and 2001, respectively and
$113 million and $156 million for the twelve months ended December
31, 2002 and 2001, respectively.
(2) Includes investment income of $1 million for both the fourth
quarter ended December 31, 2002 and 2001, and $2 million and $5
million for the twelve months ended December 31, 2002 and 2001,
respectively.
(3) Includes World Trade Center related credits of $11 million and
expenses of $15 million for the fourth quarters ended December 31,
2002 and 2001, respectively, and credits of $29 million and
expenses of $23 million for the years ended December 31, 2002 and
2001, respectively. Also for the years ended December 31, 2002 and
2001, includes income of $6 million and expenses of $187 million,
respectively, related to business transformation.
(4) Includes business transformation plan expenses of $7 million for
the year ended December 31, 2001.
(5) For the fourth quarter ended December 31, 2001, includes World
Trade Center related expenses of $90 million. For the year ended
December 31, 2002, includes $8 million of advisory expenses
related to the previously planned divestiture of the underwriting
businesses. For the year ended December 31, 2001, includes
business transformation expenses of $24 million and World Trade
Center related expenses of $135 million.
Aon Corporation
Corporate and Other
Fourth Quarter Ended Twelve Months Ended
--------------------------- ---------------------------
(millions) Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
2002 2001 Change 2002 2001 Change
------- ------- -------- ------- ------- --------
Corporate and
other
revenue (1) $ 21 $ (75) N/A% $ (21) $ (171) N/A%
-------------
Non operating
expenses
-------------
General
expenses $ 25 $ 18 39% $ 97 $ 75 29%
Interest
expense 33 29 14 124 127 (2)
Amortization
of goodwill - 30 (100) - 118 (100)
------- ------- -------- ------- ------- --------
Loss before
income tax $ (37) $ (152) N/A% $ (242) $ (491) N/A%
======= ======= ======== ======= ======= ========
Fourth Quarter Ended Twelve Months Ended
--------------------------- ---------------------------
(millions) Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
2002 2001 Change 2002 2001 Change
------- ------- -------- ------- ------- --------
(1) Components
of corporate and
other revenue
-----------------
Limited
partnership
investments $ - $ (38) N/A% $ 14 $ (94) N/A%
Income from
marketable
equity
securities
and other
investments 17 1 +500 31 7 343
------- ------- -------- ------- ------- --------
Corporate and
other revenue
before one
time items and
net gain (loss)
on disposals
and related
expenses 17 (37) N/A 45 (87) N/A
Interest on
tax refund - - - 48 - N/A
Net gain (loss)
on disposals
and related
expenses(A) 4 (38) N/A (114) (84) N/A
------- ------- -------- ------- ------- --------
Corporate and
other revenue $ 21 $ (75) N/A% $ (21) $ (171) N/A%
======= ======= ======== ======= ======= ========
(A) Includes impairment writedowns of $10 million and $23 million for
the fourth quarters ended December 31, 2002 and 2001,
respectively, and $130 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 $57 million for the twelve months ended December
31, 2002 and 2001, respectively.
Aon Corporation
Supplemental Reconciliation from Current Presentation to Prior
Reporting Basis
Fourth Quarter Ended Twelve Months Ended
--------------------------- ---------------------------
(millions Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
except per 2002 2001 Change 2002 2001 Change
share data) -------- -------- ------- -------- -------- -------
Income Before
Income Tax
-------------
Insurance
brokerage and
other services
---------------
As reported $ 233 $ 175 33% $ 763 $ 524 46%
Unusual
(credits)
charges -
World Trade
Center (11) 15 N/A (29) 23 N/A
Business
transformation
(credit) expense - - N/A (6) 187 N/A
-------- -------- ------- -------- -------- -------
Prior
reporting
basis $ 222 $ 190 17% $ 728 $ 734 (1)%
======== ======== ======= ======== ======== =======
Consulting
----------
As reported $ 44 $ 49 (10)% $ 120 $ 126 (5)%
Business
transformation
expense - - N/A - 7 N/A
-------- -------- ------- -------- -------- -------
Prior
reporting
basis $ 44 $ 49 (10)% $ 120 $ 133 (10)%
======== ======== ======= ======== ======== =======
Insurance
underwriting
-------------
As reported $ 49 $ (8) N/A% $ 152 $ 150 1%
Unusual
charges -
World Trade
Center - 90 N/A - 135 N/A
Spin-off
expenses(1) - - N/A 8 - N/A
Business
transformation
expense - - N/A - 24 N/A
-------- -------- ------- -------- -------- -------
Prior
reporting
basis $ 49 $ 82 (40)% $ 160 $ 309 (48)%
======== ======== ======= ======== ======== =======
Operating
segments
---------
As reported $ 326 $ 216 51% $1,035 $ 800 29%
Unusual
(credits)
charges -
World Trade
Center (11) 105 N/A (29) 158 N/A
Spin-off
expenses(1) - - N/A 8 - N/A
Business
transformation
(credit)
expense - - N/A (6) 218 N/A
-------- -------- ------- -------- -------- -------
Prior
reporting
basis $ 315 $ 321 (2)% $1,008 $1,176 (14)%
======== ======== ======= ======== ======== =======
Consolidated
------------
As reported $ 289 $ 64 352% $ 793 $ 309 157%
Unusual
(credits)
charges -
World Trade
Center (11) 105 N/A (29) 158 N/A
Spin-off
expenses(1) - - N/A 8 - N/A
Business
transformation
(credit) expense - - N/A (6) 218 N/A
-------- -------- ------- -------- -------- -------
Prior
reporting
basis $ 278 $ 169 64% $ 766 $ 685 12%
======== ======== ======= ======== ======== =======
----------------------------------------------------------------------
Dilutive Net
Income Per Share:
------------------
As reported $ 0.59 $ 0.10 490% $ 1.64 $ 0.53 209%
Unusual
(credits)
charges -
World Trade
Center (0.02) 0.23 N/A (0.06) 0.35 N/A
Spin-off
expenses(1) - - N/A 0.02 - N/A
Business
transformation
(credit) expense - - N/A (0.01) 0.49 N/A
-------- -------- ------- -------- -------- -------
Prior
reporting
basis $ 0.57 $ 0.33 73% $ 1.59 $ 1.37 16%
======== ======== ======= ======== ======== =======
----------------------------------------------------------------------
(1) - Previously reported as special charges in the first and second
quarter of 2002.
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