Aon Reports First Quarter 2004 Results.Business Editors CHICAGO--(BUSINESS WIRE)--May 3, 2004 Aon Corporation (NYSE NYSE See: New York Stock Exchange :AOC AOC, n an acronym for the Aromatherapy Organizations Council. ) today reported first quarter 2004 results. First Quarter Review Net income per share was $0.53 compared to $0.48 in 2003. Net income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the rose to $192 million or $0.60 per share from $160 million or $0.51 per share a year ago. Certain businesses were reclassified into discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. during the first quarter as part of Aon's strategy to divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. non-core operations. First quarter 2003 results included a $37 million pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern ($0.07 per share) World Trade Center (WTC WTC World Trade Center, see there ) unusual charge. An accelerated process for determining and approving certain discretionary incentive compensation also influenced year-to-year comparisons. Due to this accelerated process, approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $43 million ($0.09 per share) of discretionary incentive compensation was accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. in first quarter 2004 that would have been expensed in second quarter 2004 under the year ago process. This accelerated process will have no effect on six months and full year comparisons at either 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: or segment level. Consolidated revenues grew 9% to $2.6 billion compared with a year ago. The positive influence of foreign exchange rates and demand for Aon's services and products drove the increase. Patrick G. Ryan Ryan may refer to: Places
Mr. Ryan added, "We had significant margin improvement in our consulting segment driven by disciplined expense management. 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. results were negatively influenced by increased costs but margins are targeted to improve in future quarters." Discontinued Operations First quarter after tax losses from discontinued operations were $22 million ($0.07 per share) in 2004 and $8 million ($0.03 per share) in 2003. During first quarter 2004, four non-core claims businesses in the U.K. were placed into discontinued operations from the risk and insurance brokerage services segment. Three of the four were sold in the first quarter. The net loss from the discontinued 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: U.K. claims businesses was $22 million after tax ($0.07 per share) in 2004: $5 million from operations ($0.02 per share) and $17 million from the sale ($0.05 per share). For first quarter 2003, the net loss from these U.K. claims services businesses was $3 million after tax ($0.01 per share). A non-core consulting subsidiary was also sold during the quarter and placed into discontinued operations. This business had a negligible  This article or section is written like a personal reflection or and may require .Please [ improve this article] by rewriting this article or section in an . effect on first quarter 2004 results and a $1 million after tax loss in 2003. The auto finance services business, previously placed into discontinued operations, had a nominal Trifling, token, or slight; not real or substantial; in name only. Nominal capital, for example, refers to extremely small or negligible funds, the use of which in a particular business is incidental. NOMINAL. Relating to a name. loss in 2004 and a $4 million after tax loss ($0.01 per share) in 2003. First Quarter Segment Review This press release contains references to organic revenue growth that management believes is an important measure to evaluate new business production from existing operations. Please see additional information below regarding organic revenue growth. Prior period segment results for risk and insurance brokerage services, consulting and corporate and other were reclassified in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with certain non-core businesses being placed into discontinued operations. Risk and Insurance Brokerage Services first quarter revenue grew 8% to $1.5 billion. Organic revenue growth for the total segment was 3%, led by International and Americas A·mer·i·cas , the See America. risk management and insurance brokerage. 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 4% to $243 million in the quarter, and the pretax margin was 16.5% versus 17.2% a year ago. First quarter 2004 pretax income and margin comparisons versus the prior year period were negatively affected by the accelerated approval process for certain discretionary incentive compensation ($33 million), which equaled 2.2 percentage points of pretax margin in the segment. Investment income was $5 million lower than last year, due in part to lower short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. . In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with FAS 144, a separate U.K. claims services operation that was also sold during first quarter 2004 will continue to be reflected in the risk and insurance brokerage services segment, since Aon will have an ongoing profit-sharing profit-sharing Noun a system in which a portion of the net profit of a business is shared among its employees profit-sharing n → participación f de empleados en los beneficios interest. The pretax gain on the sale of this business was approximately $4 million. Consulting revenue rose 8% to $301 million. While challenging economic conditions limited organic revenue growth to 1%, pretax income increased 24% to $26 million and the pretax margin grew to 8.6% versus 7.5% in 2003. The pretax margin improvement was driven by better human resource 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. results. Insurance Underwriting revenue increased 10% to $781 million. Total underwriting segment organic revenue growth was 3%, driven by written premiums within the 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. , credit and property/casualty (P&C) group. Accident and health (A&H) insurance premiums were lower on an organic basis due to the discontinuance Cessation; ending; giving up. The discontinuance of a lawsuit, also known as a dismissal or a non-suit, is the voluntary or involuntary termination of an action. DISCONTINUANCE, pleading. A chasm or interruption in the pleading. 2. of certain Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of and non-core businesses as planned. Pretax income was $53 million compared with $63 million in 2003. Pretax margins were 6.8% in 2004 compared with 8.9% in 2003. A&H had solid results but the comparisons were negatively affected by the accelerated approval process for certain discretionary compensation ($5 million) and underperformance in certain warranty, credit and P&C lines, some of which are in run-off run-off n (in contest, election) → desempate m (= extra race); carrera de desempate run-off n (in contest, election) → . Corporate and Other segment revenue increased to $36 million from $31 million last year. Both periods benefited from investments in 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 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. Holdings Limited (NYSE:ENH ENH Enhancement ENH Evanston Northwestern Healthcare (Illinois) ENH Evanston-Northwestern Hospital ). Aon sold 1.4 million shares of Endurance common stock in first quarter 2004 and held 9.9 million shares and 4.1 million warrants at March 31, 2004. First quarter 2003 results were negatively influenced by 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. write-downs of $28 million. The pretax loss pretax loss A loss reported before tax benefits are considered. in the quarter was $22 million compared with a loss of $50 million a year ago. First quarter 2003 results included a $37 million pretax WTC unusual charge and first quarter 2004 included $3 million of expense from the accelerated approval process for incentive compensation. Debt reduction and declining interest rates lowered interest expense but were more than offset by a $14 million increase from the reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of the trust preferred securities (see below). Financial Strength Highlights During the first quarter, $136 million of debt was paid down. Total debt and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. decreased $341 million to approximately $2.1 billion at March 31, 2004 from March 31, 2003. Total debt and preferred stock as a percentage of total capital improved to 31% from 37% over the same period. 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. increased to approximately $4.7 billion. In January January: see month. 2003, 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). ) issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. 46). As a result of the adoption of the required portion of FIN 46, the trust preferred capital securities decreased by $702 million, offset by an increase in notes payable of $726 million and other receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed of $24 million as of December December: see month. 31, 2003. There was no effect on net income or consolidated equity and prior periods were not restated. In first quarter 2004, the dividends on the trust preferred were reclassified to pretax interest expense from 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. minority interest, netting to no effect on net income. Prior periods were not restated. Approximately 90% of Aon's investment portfolio at quarter end was in 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 maturities. More than 96% of the fixed income securities were investment grade. Other Items As previously reported, the second quarter 2004 dilutive net income per share calculation will include approximately 14 million additional shares for the potential conversion of the 3 1/2% Senior Convertible Debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. (approximately 10 million additional shares 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. ). Interest expense (after tax) related to this convertible debt will be added back to net income for the calculation. The computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. of dilutive net income per share for first quarter 2004 was not affected. 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 positive impact of foreign currency translations was approximately $0.08 per share in the quarter. The comparable benefit to first quarter 2003 results was approximately $0.03 per share. The consolidated effective tax rate on continuing operations decreased to 36% in 2004 from 37% in 2003. Future Outlook Mr. Ryan commented, "Based on our current outlook and goal for the year, we are comfortable that Aon can achieve or exceed earnings per share of $2.20 in 2004 from continuing operations including the dilutive impact of convertible debt in the earnings per share calculation. Future gains/losses from our Endurance warrants and future gains/losses from divestitures are not included in this outlook." Mr. Ryan added, "Our goals for the risk and insurance brokerage services segment are a pretax margin in the high teens for full year 2004 and at least 20% for full year 2005." The Company will host an audio webcast on Tuesday Tuesday: see week. , May 4 at 10:00 a.m. central time that can be accessed at www.aon.com. Aon Corporation (www.aon.com) is a leading provider of risk management services, insurance 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, human capital and 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 , and specialty insurance underwriting. The company employs approximately 53,000 professionals in its 600 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions. This press release contains 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, resolution of regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. issues, pension funding, ultimate paid claims may be different from actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin estimates and actuarial estimates may change over time, changes in commercial property and casualty markets and commercial premium rates, the competitive environment, the actual costs 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 heightened level of potential errors and omissions errors and omissions n. short-hand for malpractice insurance which gives physicians, attorneys, architects, accountants and other professionals coverage for claims by patients and clients for alleged professional errors and omissions which amount to negligence. liability arising from placements of complex policies and sophisticated reinsurance arrangements in an insurance market in which insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. reserves are under pressure, and the timing and resolution of related insurance and reinsurance issues relating to the events of September September: see month. 11, 2001. 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 that management believes is an important measure to evaluate new business production from existing operations. We also believe that this supplemental information is helpful to investors. Organic revenue growth excludes from reported revenues the impact of foreign exchange, acquisitions, divestitures, transfers between business units, investment income, reimbursable re·im·burse tr.v. re·im·bursed, re·im·burs·ing, re·im·burs·es 1. To repay (money spent); refund. 2. To pay back or compensate (another party) for money spent or losses incurred. expenses, unusual items, and for the underwriting segment only, an adjustment between written and earned premium Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. . A reconciliation is provided in the attached schedules. The supplemental organic revenue growth information does not affect net income or any other GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). reported amounts. It should be viewed in addition to, not in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. , the Company's Consolidated Summary of Operations. Industry peers provide similar supplemental information regarding their revenue performance, although they do not make identical adjustments.
Aon Corporation
Consolidated Summary of Operations
First Quarter Ended
-------------------------
(millions except per share data) Mar. 31, Mar. 31, Percent
2004 2003 Change
-------------------------
Revenue
-------
Brokerage commissions and fees $1,800 $1,658 9 %
Premiums and other 692 632 9
Investment income 81 79 3
-------- -------- -------
Total revenue 2,573 2,369 9
-------- -------- -------
Expenses
--------
General expenses 1,842 1,678 10
Benefits to policyholders 383 345 11
Interest expense (1) 34 28 21
Amortization of intangible assets 14 13 8
Unusual charges - World Trade Center - 37 (100)
-------- -------- -------
Total expenses 2,273 2,101 8
-------- -------- -------
Income from continuing operations before
income tax and minority interest 300 268 12
Provision for income tax (36% in 2004 and
37% in 2003) 108 99 9
-------- -------- -------
Income from continuing operations before
minority interest 192 169 14
Minority interest - 8.205% trust preferred
capital securities (1) - (9) N/A
-------- -------- -------
Income from continuing operations 192 160 20
Loss from discontinued operations, net of
tax (22) (8) N/A
-------- -------- -------
Net income $170 $152 12 %
-------- -------- -------
-------- -------- -------
Preferred stock dividends (1) (1) -
-------- -------- -------
Net income available for common stockholders $169 $151 12 %
-------- -------- -------
-------- -------- -------
Basic net income per share:
Income from continuing operations $0.60 $0.51 18 %
Discontinued operations (0.07) (0.03) N/A
-------- -------- -------
Net income $0.53 $0.48 10 %
-------- -------- -------
-------- -------- -------
Dilutive net income per share:
Income from continuing operations $0.60 $0.51 18 %
Discontinued operations (0.07) (0.03) N/A
-------- -------- -------
Net income $0.53 $0.48 10 %
-------- -------- -------
-------- -------- -------
Dilutive average common and common equivalent
shares outstanding (2) 321.3 315.2 2 %
-------- -------- -------
-------- -------- -------
(1) Upon the adoption of FIN 46 on December 31, 2003, Aon was required
to deconsolidate its trust preferred capital securities, which was
offset by an increase in notes payable. Beginning in 2004, no
after-tax interest on the capital securities will be reported.
However, pretax interest expense on the notes payable ($14 million
for first quarter 2004) is reported as part of interest expense.
(2) The second quarter 2004 dilutive net income per share calculation
will include approximately 14 million additional shares for the
potential conversion of the 3.5% Senior Convertible Debentures.
The computation of dilutive net income per share for first quarter
2004 was not affected.
Aon Corporation
Segments - First Quarter Continuing Operations
First Quarter Ended
-------------------------
(millions) Mar. 31, Mar. 31, Percent
2004 2003 Change
-------- -------- -------
Revenue
-------
Risk and insurance brokerage services
Risk management and insurance brokerage -
Americas $532 $507 5 %
Risk management and insurance brokerage -
International 633 524 21
Reinsurance brokerage and related services 247 242 2
Claims services 61 88 (31)
-------- -------- ------
Total risk and insurance brokerage
services 1,473 1,361 8
-------- -------- ------
Consulting
Benefits, compensation, management and
communications consulting 225 209 8
Human resource outsourcing 76 71 7
-------- -------- ------
Total consulting 301 280 8
-------- -------- ------
Insurance underwriting
Accident & health and life 425 399 7
Warranty, credit and property & casualty 356 310 15
-------- -------- ------
Total insurance underwriting 781 709 10
-------- -------- ------
Corporate and other 36 31 16
Intersegment revenues (18) (12) N/A
-------- -------- ------
Total $2,573 $2,369 9 %
-------- -------- ------
-------- -------- ------
Investment income (included in Revenue above)
---------------------------------------------
Risk and insurance brokerage services $14 $19 (26)%
Consulting - 1 (100)
Insurance underwriting, excluding deposit-
type contracts 31 26 19
Insurance underwriting - deposit-type
contracts - 2 (100)
Corporate and other 36 31 16
-------- -------- ------
Total $81 $79 3 %
-------- -------- ------
-------- -------- ------
Income (loss) from continuing operations
before income tax and minority interest
----------------------------------------
Risk and insurance brokerage services $243 $234 4 %
Consulting 26 21 24
Insurance underwriting 53 63 (16)
Corporate and other (22) (50) N/A
-------- -------- ------
Total $300 $268 12 %
-------- -------- ------
-------- -------- ------
Income from continuing operations before
income tax - margins
----------------------------------------
Risk and insurance brokerage services 16.5% 17.2%
Consulting 8.6% 7.5%
Insurance underwriting 6.8% 8.9%
Total 11.7% 11.3%
Aon Corporation
Segments - First Quarter Continuing Operations
First Quarter Ended
----------------------------------------
Less: Less: Organic
Less: Acquisitions, All Revenue
Currency Divestitures Other Growth
Impact & Transfers (1) (2)
----------------------------------------
Revenue
-------
Risk and insurance brokerage
services
Risk management and
insurance brokerage -
Americas 1 % - % - % 4 %
Risk management and
insurance brokerage -
International 13 - 2 6
Reinsurance brokerage and
related services 7 - (4) (1)
Claims services 1 (24) 2 (10)
-------- ----------- -------- --------
Total risk and insurance
brokerage services 7 (1) (1) 3
-------- ----------- -------- --------
Consulting
Benefits, compensation,
management and
communications consulting 7 1 - -
Human resource outsourcing 4 - (1) 4
-------- ----------- -------- --------
Total consulting 6 1 - 1
-------- ----------- -------- --------
Insurance underwriting
Accident & health and life 6 - 5 (4)
Warranty, credit and
property & casualty 5 - (1) 11
-------- ----------- -------- --------
Total insurance
underwriting 5 - 2 3
-------- ----------- -------- --------
Corporate and other N/A N/A N/A N/A
Intersegment revenues N/A N/A N/A N/A
-------- ----------- -------- --------
Total 6 % (1)% 1 % 3 %
-------- ----------- -------- --------
-------- ----------- -------- --------
(1) Includes the impact of investment income, reimbursable expenses,
adjustment between written and earned premium and fees in
insurance underwriting only, and unusual items.
(2) Organic revenue growth excludes the impact of foreign exchange,
acquisitions, divestitures, transfers and items described in (1).
Written premiums and fees are the basis for organic revenue growth
within the Insurance Underwriting segment.
Aon Corporation
Corporate and Other - Continuing Operations
First Quarter Ended
-------------------------
(millions) Mar. 31, Mar. 31, Percent
2004 2003 Change
-------------------------
Revenue
-------
Income from marketable equity securities
and other investments (1) $22 $53 (58)%
Limited partnership investments 4 - N/A
Net gain (loss) on disposals and related
expenses (2) 10 (22) N/A
-------- -------- -------
Total other investments 36 31 16
-------- -------- -------
Expenses
--------
General expenses 24 16 50
Interest expense (3) 34 28 21
Unusual charges - World Trade Center - 37 (100)
-------- -------- -------
Total expenses 58 81 (28)
-------- -------- -------
Loss before income tax $(22) $(50) N/A %
-------- -------- -------
-------- -------- -------
First Quarter Ended
-------------------------
(millions) Mar. 31, Mar. 31, Percent
2004 2003 Change
-------------------------
(1) Includes:
Income from Endurance warrants $4 $45 (91)%
Equity earnings - Endurance 16 7 129
-------- -------- -------
Total $20 $52 (62)%
-------- -------- -------
-------- -------- -------
(2) Includes:
Gain on sale of Endurance stock $11 $- N/A %
Impairment writedowns (1) (28) N/A
(3) Upon the adoption of FIN 46 on December 31, 2003, Aon was required
to deconsolidate its trust preferred capital securities, which was
offset by an increase in notes payable. Interest expense for the
first quarter ended March 31, 2004 includes $14 million on these
notes payable.
Aon Corporation
Consolidated Summary of Operations - Reclassified for Discontinued
Operations
2003
-----------------------------------------
(millions except per share 1st 2nd 3rd 4th Full
data) Quarter Quarter Quarter Quarter Year
------- ---------------------------------
Revenue
-------
Brokerage commissions and
fees $1,658 $1,695 $1,646 $1,831 $6,830
Premiums and other 632 635 673 669 2,609
Investment income 79 89 57 88 313
------- ------- ------- ------- -------
Total revenue 2,369 2,419 2,376 2,588 9,752
------- ------- ------- ------- -------
Expenses
--------
General expenses 1,678 1,783 1,725 1,857 7,043
Benefits to policyholders 345 325 367 390 1,427
Interest expense 28 27 24 22 101
Amortization of
intangible assets 13 15 18 17 63
Unusual charges (credits)
- World Trade Center 37 9 - (60) (14)
------- ------- ------- ------- -------
Total expenses 2,101 2,159 2,134 2,226 8,620
------- ------- ------- ------- -------
Income from continuing
operations before income
tax and minority interest 268 260 242 362 1,132
Provision for income tax
(37%) 99 96 90 134 419
------- ------- ------- ------- -------
Income from continuing
operations before minority
interest 169 164 152 228 713
Minority interest -
8.205% trust preferred
capital securities (9) (9) (9) (9) (36)
------- ------- ------- ------- -------
Income from continuing
operations 160 155 143 219 677
Loss from discontinued
operations, net of tax (8) (9) (28) (4) (49)
------- ------- ------- ------- -------
Net income $152 $146 $115 $215 $628
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Preferred stock dividends (1) - (1) (1) (3)
------- ------- ------- ------- -------
Net income available for
common stockholders $151 $146 $114 $214 $625
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Basic net income per share:
Income from continuing
operations $0.51 $0.49 $0.45 $0.68 $2.12
Discontinued operations (0.03) (0.03) (0.09) (0.01) (0.15)
------- ------- ------- ------- -------
Net income $0.48 $0.46 $0.36 $0.67 $1.97
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Dilutive net income per
share:
Income from continuing
operations $0.51 $0.49 $0.45 $0.68 $2.12
Discontinued operations (0.03) (0.03) (0.09) (0.01) (0.15)
------- ------- ------- ------- -------
Net income $0.48 $0.46 $0.36 $0.67 $1.97
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Dilutive average common and
common equivalent shares
outstanding 315.2 318.2 318.6 319.3 317.8
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Aon Corporation
Segments - Reclassification for Discontinued Operations
2003
-----------------------------------------
(millions) 1st 2nd 3rd 4th Full
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- -------
Revenue
-------
Risk and insurance brokerage
services
As reported $1,374 $1,424 $1,370 $1,509 $5,677
Less: reclassification to
discontinued operations 13 13 13 11 50
------- ------- ------- ------- -------
As reclassified 1,361 1,411 1,357 1,498 5,627
------- ------- ------- ------- -------
Consulting
As reported 282 294 286 331 1,193
Less: reclassification to
discontinued operations 2 2 2 2 8
------- ------- ------- ------- -------
As reclassified 280 292 284 329 1,185
------- ------- ------- ------- -------
Insurance underwriting 709 692 742 740 2,883
Corporate and other
As reported 35 44 14 40 133
Less: reclassification to
discontinued operations
(1) 4 4 - - 8
------- ------- ------- ------- -------
As reclassified 31 40 14 40 125
------- ------- ------- ------- -------
Intersegment revenues (12) (16) (21) (19) (68)
------- ------- ------- ------- -------
Total $2,369 $2,419 $2,376 $2,588 $9,752
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Income (Loss) Before Income
Tax and Minority Interest
---------------------------
Risk and insurance brokerage
services
As reported $230 $175 $187 $237 $829
Less: reclassification to
discontinued operations (4) (5) (5) (6) (20)
------- ------- ------- ------- -------
As reclassified 234 180 192 243 849
------- ------- ------- ------- -------
Consulting
As reported 20 21 20 47 108
Less: reclassification to
discontinued operations (1) (1) - - (2)
------- ------- ------- ------- -------
As reclassified 21 22 20 47 110
------- ------- ------- ------- -------
Insurance underwriting 63 64 58 11 196
Corporate and other
As reported (57) (15) (28) 61 (39)
Less: reclassification to
discontinued operations
(1) (7) (9) - - (16)
------- ------- ------- ------- -------
As reclassified (50) (6) (28) 61 (23)
------- ------- ------- ------- -------
Total $268 $260 $242 $362 $1,132
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Income from continuing
operations before income
tax - margins
-------------------------
Risk and insurance brokerage
services
As reported 16.7% 12.3% 13.6% 15.7% 14.6%
As reclassified 17.2% 12.8% 14.1% 16.2% 15.1%
Consulting
As reported 7.1% 7.1% 7.0% 14.2% 9.1%
As reclassified 7.5% 7.5% 7.0% 14.3% 9.3%
Insurance underwriting 8.9% 9.2% 7.8% 1.5% 6.8%
Total 11.3% 10.7% 10.2% 14.0% 11.6%
(1) The auto finance servicing business was reclassified to
discontinued operations in third quarter 2003.
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