Aon Reports 7% Increase in Second Quarter Operating Segment Revenue and Income Before Special Charges.Business Editors CHICAGO--(BUSINESS WIRE)--August 2, 2001 Aon Corporation (NYSE NYSE See: New York Stock Exchange : AOC AOC, n an acronym for the Aromatherapy Organizations Council. ) today reported second quarter dilutive earnings per share before special charges and non-operating corporate segment revenue of $0.47, up 7% from $0.44 in second quarter 2000 on a comparable basis. This increase was driven by total operating segment reported revenue growth of 7%. Second quarter 2001 reported net income and dilutive earnings per share were $29 million and $0.11, respectively, compared with $129 million and $0.49 in the year ago period. Excluding special charges related to the previously announced business transformation plan of $0.33 per share, second quarter 2001 earnings were $0.44 per share versus $0.49 per share in second quarter 2000. The year-over-year decline in second quarter non-operating corporate segment revenue was $36 million ($0.08 per share) to a negative $0.03 per share from a positive $0.05 per share in second quarter 2000. Aon's operating segments - insurance brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. and other services, consulting and insurance 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. - recorded second quarter 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. before special charges of $304 million, up 7% from $284 million in second quarter 2000. For the six months, operating segment pretax income before special charges grew 8% to $593 million, up from $550 million in 2000. Adjusted for foreign currency translation, second quarter total operating segment revenues increased 10%. Second quarter total operating segment investment income decreased $11 million or 11%, to $92 million from $103 million in second quarter 2000 due mostly to declining interest rates. "Total operating segment results showed good improvement for the quarter driven by favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. organic revenue growth in our brokerage and consulting segments," said Patrick G. Ryan Ryan may refer to: Places
"As we look ahead, we see continued firming of property and casualty premium rates, but also some pressure from softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. global economies and lower interest rates that negatively affect our operating segment investment income," Ryan said. "Given our current perspective, our total operating segments are expected to achieve double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. pretax income growth before special charges for the year." 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: revenue of $1.9 billion in the second quarter, increased 5% from the prior year. Adjusting for foreign currency translation, revenue growth was 8%. 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 was not material. Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern special charges of $146 million or $0.33 per share, recorded in second quarter 2001, relate to the business transformation plan previously announced in November November: see month. 2000. The charge was principally comprised of termination benefits and other exit costs. Second quarter reported insurance brokerage and other services segment revenue grew 8% to $1.154 billion, compared with $1.065 billion in 2000. Adjusted for foreign currency translation, revenue growth was 11%. Organic revenue growth was also 11% for the quarter. Claims services and international, wholesale and 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. brokerage posted strong revenue growth. Commercial property and casualty premium rate increases were evident for most lines of coverage and client demand for alternative risk transfer programs and services has risen along with the upward trend in premium rates. Aon is a leader in the alternative risk transfer field through its integrated claims, captive captive said of naturally wild or feral animals kept in captivity for educational and scientific investigation with no attempt being made to domesticate them. management, loss control and actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin services. Insurance brokerage and other services pretax income before special charges rose 7% to $195 million from $182 million in second quarter 2000. Pretax margin before special charges in second quarter 2001 was 16.9% compared with 17.1% in the year ago period. A decline in investment income, due mostly to lower interest rates, affected margin comparisons. Adjusting for the decline in investment income, second quarter pretax margins for the insurance brokerage and other services segment increased 50 basis points. Strong growth of lower-margin claims services revenues in the second quarter also influenced the margin comparisons. Consulting segment reported revenues rose 27% to $229 million from $180 million in the year-ago second quarter. Pretax income before special charges rose 30% to $30 million versus $23 million in second quarter 2000. This growth included the results of Actuarial Sciences Actuarial science applies mathematical and statistical methods to finance and insurance, particularly to risk assessment. Actuaries are professionals who are qualified in this field through examinations and experience. Associates, Inc., acquired in fourth quarter 2000, and partial results of ASI ASI, n See Anxiety Sensitivity Index. Solutions Incorporated, acquired in second quarter 2001. Consulting segment organic revenue growth was 9% for the quarter. The consulting pretax margin before special charges expanded to 13.1% in the second quarter from 12.8% in the year ago period. Consulting segment results reflect strong fundamental operating performance, particularly in the employee benefits area. Insurance underwriting segment reported revenues were $548 million in second quarter 2001 compared with $552 million in second quarter 2000. Adjusted for foreign currency translation, revenues increased 2%. Pretax income of $79 million in the second quarter equaled the prior year period. The underwriting pretax margin was 14.4% for the quarter compared with 14.3% in second quarter 2000. Corporate and other segment revenue, comprised primarily of equity-related revenues from limited partnerships and directly owned equities, was negative $14 million for the quarter compared with a positive $22 million in second quarter 2000. The decline was due to reduced valuations for limited partnership investments. The corporate and other segment pretax loss pretax loss A loss reported before tax benefits are considered. for the quarter was $94 million, compared with a pretax loss of $56 million in the prior year quarter due primarily to the decline in corporate and other segment revenue. Six months 2001 net income and dilutive earnings per share were $48 million and $0.17, respectively, compared with $245 million and $0.93 in the year ago period. Excluding 2001 special charges of $0.49 per share and the adoption of SAB SAB Spontaneous abortion. See Abortion. 101 in 2000 ($0.03 per share), six months 2001 earnings were $0.66 per share compared with $0.96 per share in six months 2000. Over the last three quarters, the Company recorded a total of $300 million in special charges related to the business transformation plan. As originally projected, total plan costs, which include transition expenses, are expected to be less than $325 million and related expense savings are anticipated to be between $150 million to $200 million on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis. The annualized savings are expected to begin at the lower end of the range in fourth quarter 2001, and increase within the range in 2002 as transition costs related to the business transformation plan are eliminated. In July July: see month. 2001, the 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). ) approved the issuance of 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. , which changes the accounting for goodwill from an amortization method to an impairment-only approach. Effective January January: see month. 1, 2002, the amortization of goodwill will no longer be included in Aon's reported earnings per share. The full impact of applying this standard is yet to be determined, however, reported earnings for Aon are expected to increase by at least $0.36 per share on an annualized basis beginning in 2002. Goodwill amortization expense equaled $0.09 per share in the second quarters of both 2001 and 2000. Aon Corporation (www.aon.com) is a holding company that is comprised of a family of insurance brokerage, consulting and insurance underwriting subsidiaries. Aon's common stock is listed on the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. , Frankfurt Frankfurt (frängk`f  rt) or Frankfurt am Main (frängk`f and London stock exchanges London Stock ExchangeLondon marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. . 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 historical results or those anticipated, depending on a variety of factors such as general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, 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. , the final form of the business transformation plan, the ultimate cost and timing of the implementation thereof, the actual cost savings and other benefits resulting therefrom there·from adv. From that place, time, or thing. Adv. 1. therefrom - from that circumstance or source; "atomic formulas and all compounds thence constructible"- W.V. , whether the Company ultimately implements the proposed spin-off of its underwriting operations, and the timing and terms associated therewith there·with adv. 1. With that, this, or it. 2. In addition to that. 3. Archaic Immediately thereafter. Adv. 1. . 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.
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Aon Corporation
Consolidated Summary of Operations
(millions except
per share data) Second Quarter Ended Six Months Ended
-------------------------- --------------------------
June 30, June 30, Percent June 30, June 30, Percent
2001 2000 Change 2001 2000 Change
-------- -------- -------- -------- -------- --------
Revenue
Brokerage
commissions
and fees $ 1,347 $ 1,203 12% $ 2,628 $ 2,408 9%
Premiums and
other 492 491 - 1,000 959 4
Investment
income 78 125 (38) 100 262 (62)
-------- -------- -------- -------- -------- --------
Total revenue 1,917 1,819 5 3,728 3,629 3
-------- -------- -------- -------- -------- --------
Expenses
General
expenses 1,377 1,262 9 2,701 2,533 7
Benefits to
policyholders 260 257 1 552 509 8
Interest expense 31 33 (6) 67 64 5
Amortization of
intangible
assets 39 39 - 78 77 1
-------- -------- -------- -------- -------- --------
Total expenses 1,707 1,591 7 3,398 3,183 7
-------- -------- -------- -------- -------- --------
Income Before
Special Charges 210 228 (8) 330 446 (26)
Special charges (146) - N/A (218) - N/A
-------- -------- -------- -------- -------- --------
Income Before
Income Tax,
Minority
Interest and
Accounting
Change 64 228 (72) 112 446 (75)
Provision for
income tax 25 89 (72) 44 174 (75)
-------- -------- -------- -------- -------- --------
Income Before
Minority
Interest and
Accounting
Change 39 139 (72) 68 272 (75)
Minority
interest -
8.205% trust
preferred
capital
securities (10) (10) - (20) (20) -
-------- -------- -------- -------- -------- --------
Income Before
Accounting
Change 29 129 (78) 48 252 (81)
Cumulative
effect of
change in
accounting
principle, net
of tax (1) - - - - (7) N/A
-------- -------- -------- -------- -------- --------
Net Income $ 29 $ 129 (78)% $ 48 $ 245 (80)%
======== ======== ======== ======== ======== ========
Preferred stock
dividends - - - (1) (1) -
-------- -------- -------- -------- -------- --------
Net Income
Available for
Common
Stockholders $ 29 $ 129 (78)% $ 47 $ 244 (81)%
======== ======== ======== ======== ======== ========
Net Income Per Share:
Basic net
income per
share $ 0.11 $ 0.50 (78)% $ 0.18 $ 0.94 (81)%
======== ======== ======== ======== ======== ========
Dilutive net
income per share:
Net income
before
special
charges $ 0.44 $ 0.49 (10)% $ 0.66 $ 0.96 (31)%
Special
charges (0.33) - N/A (0.49) - N/A
Cumulative
effect of
change in
accounting
principle(1) - - - - (0.03) N/A
-------- -------- -------- -------- -------- --------
Dilutive net
income per
share $ 0.11 $ 0.49 (78)% $ 0.17 $ 0.93 (82)%
======== ======== ======== ======== ======== ========
Dilutive
average
common and
common
equivalent
shares
outstanding 270.2 261.7 268.7 261.1
======== ======== ======== ========
(1) Adoption of SEC Staff Accounting Bulletin 101, effective January
1, 2000.
Aon Corporation
Operating Segments
Second Quarter Ended Six Months Ended
------------------------- ----------------------------
(millions) June 30, June 30, Percent June 30, June 30, Percent
2001 2000 Change 2001 2000 Change
------- -------- -------- ---------- --------- -------
Revenue
Insurance
brokerage
and other
services (1) $ 1,154 $ 1,065 8 % $ 2,271 $ 2,139 6 %
Consulting (2) 229 180 27 441 356 24
Insurance
underwriting 548 552 (1) 1,115 1,082 3
------- -------- -------- ---------- -------- -------
Total revenue $ 1,931 $ 1,797 7 % $ 3,827 $ 3,577 7 %
======= ======== ======== ========== ======== =======
Income Before Income Tax
Insurance
brokerage and
other services $ 195 $ 182 7 % $ 391 $ 362 8 %
Consulting 30 23 30 55 42 31
Insurance
underwriting 79 79 - 147 146 1
------- -------- -------- ---------- -------- -------
Total income
before income
tax excluding
special charges 304 284 7 593 550 8
Special charges (146) - N/A (218) - N/A
------- -------- -------- ---------- -------- -------
Total income
before
income tax $ 158 $ 284 (44) % $ 375 $ 550 (32)%
======= ======== ======== ========== ======== =======
(1) Includes investment income of $35 million and $42 million for the
second quarter ended June 30, 2001 and 2000, respectively, and $81
million and $85 million for the six months ended June 30, 2001 and
2000, respectively.
(2) Includes investment income of $1 million for both the second
quarter ended June 30, 2001 and 2000, and $3 million and $2
million for the six months ended June 30, 2001 and 2000,
respectively.
Aon Corporation
Corporate and Other
Second Quarter Ended Six Months Ended
------------------------- -------------------------
(millions) June 30, June 30, Percent June 30, June 30, Percent
2001 2000 Change 2001 2000 Change
-------- -------- ------- -------- -------- -------
Corporate and
other revenue (1) $ (14) $ 22 N/A % $ (99) $ 52 N/A %
Non operating expenses
Amortization
of goodwill $ 29 $ 29 - % $ 58 $ 56 4 %
Interest expense 31 33 (6) 67 64 5
General expenses 20 16 25 39 36 8
-------- -------- ------- -------- -------- -------
Loss before
income tax $ (94) $ (56) N/A % $ (263) $ (104) N/A %
======== ======== ======= ======== ======== =======
Second Quarter Ended Six Months Ended
------------------------- -------------------------
(millions) June 30, June 30, Percent June 30, June 30, Percent
2001 2000 Change 2001 2000 Change
-------- -------- ------- -------- -------- -------
(1)Components of
corporate and other revenue
Change in valuation on
private limited
partnership
investments $ (7) $ 32 N/A % $ (63) $ 60 N/A %
Income from
marketable equity
securities and
other investments 3 1 200 4 4 -
-------- -------- ------- -------- -------- -------
Corporate and other
revenue before income
(loss) on disposals
and related expenses (4) 33 N/A (59) 64 N/A
Income (loss) on
disposals and
related expenses (10) (11) N/A (40)(a) (12) N/A
-------- -------- ------- -------- -------- -------
Corporate and
other revenue $ (14) $ 22 N/A % $ (99) $ 52 N/A %
======== ======== ======= ======== ======== =======
(a) Includes impairment writedowns of $29 million in first quarter
2001.
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