Aon Reports Fourth Quarter and Twelve Months 2003 Results.Business Editors CHICAGO--(BUSINESS WIRE)--Feb. 10, 2004 Aon Corporation (NYSE NYSE See: New York Stock Exchange :AOC AOC, n an acronym for the Aromatherapy Organizations Council. ) today reported fourth quarter and twelve months 2003 results. Fourth Quarter and Twelve Months Review Net income per share for the fourth quarter grew to $0.67 from $0.59 in 2002. Twelve months net income was $1.97 per share, up from $1.64 per share in 2002. Fourth quarter 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 $215 million or $0.67 per share from $186 million or $0.62 per share in 2002. Twelve months net income from continuing operations grew to $663 million or $2.08 per share from $486 million or $1.71 per share in 2002. Unusual World Trade Center (WTC WTC World Trade Center, see there ) credits per share were $0.12 and $0.02, respectively, in fourth quarter 2003 and 2002. Twelve months unusual WTC credits were $0.03 per share and $0.06 per share for the comparable periods. 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: revenues grew 10% to $2.6 billion in the fourth quarter and 11% to $9.8 billion for the full year, compared with the year ago periods. Solid demand for Aon's services and products drove the increases, along with the positive influence of foreign exchange rates. Patrick G. Ryan Ryan may refer to: Places
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. has grown, leverage ratios have improved, and we made an early pension plan contribution equaling $100 million in the fourth quarter." Mr. Ryan added, "While margins in our insurance brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. segment were lower than the prior year, primarily due to increased pension costs, we are committed to improving the margins in each of our major brokerage businesses. In addition, we are evaluating strategic options for our claims operations. Consulting did a good job of managing expenses in a challenging economic environment, and our 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. business performed well with the exception of a run-off run-off n (in contest, election) → desempate m (= extra race); carrera de desempate run-off n (in contest, election) → book of business." Fourth 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. Risk and Insurance Brokerage Services fourth quarter revenue grew 11% to $1.5 billion. Organic revenue growth for the total segment was 7%, driven by the International and Americas A·mer·i·cas , the See America. retail and U.S. 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 businesses. 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. was $237 million compared to $249 million in fourth quarter 2002, and the pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern margin was 15.7% versus 18.4%. A favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. WTC credit ($11 million pretax) in fourth quarter 2002 benefited the year-ago pretax margin. Fourth quarter 2003 pretax income and margin comparisons versus the prior year period were negatively affected by a $29 million increase in pension costs and a $10 million decrease in claims services pretax income. Consulting revenue rose 9% to $331 million. New sales helped to offset lower headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. at existing client organizations, and revenues were even on an organic basis. Pretax income increased 7% to $47 million. The pretax margin was 14.2% versus 14.5% in the prior year. A previously reported change in the allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as method for centrally controlled costs negatively influenced the margin comparisons. Insurance Underwriting revenue increased 8% to $740 million. Total underwriting segment organic revenue growth was 9%, 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 and casualty group. Accident and health (A&H) insurance revenues on an organic basis were even year-to-year, due partly to discontinuing 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 business. Pretax income was $11 million compared with $44 million in 2002. Pretax margins were 1.5% in 2003 compared with 6.4% in 2002. A&H insurance, the largest underwriting group, had improved profitability due to the "back-to-basics" focus. Adverse property and casualty loss experience from the previously reported 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) run-off program, however, caused a $44 million decline in underwriting pretax income due to reserve strengthening. Fourth quarter 2002 results included costs ($8 million pretax) from the previously planned 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. of the underwriting businesses. The statutory capital and surplus of the total underwriting companies has improved substantially during the past year. It is anticipated that dividend payments to the parent company will resume in 2004 from Combined Insurance Company of America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. , Aon's major insurance subsidiary. Corporate and Other segment revenue of $40 million improved from $21 million in fourth quarter 2002, due mostly to increased investment income from equity securities. Investment income in fourth quarter 2003 included $16 million from an increase in the value 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 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 (Endurance) warrants. Corporate and Other segment pretax income in the quarter was $61 million compared with a loss of $37 million a year ago, largely due to a $60 million pretax gain from the previously reported final settlement of the WTC property insurance claim. General expenses were down $8 million from fourth quarter 2002, which included spin-off plan costs ($6 million pretax). As anticipated, Aon completed the sale of its automobile automobile, self-propelled vehicle used for travel on land. The term is commonly applied to a four-wheeled vehicle designed to carry two to six passengers and a limited amount of cargo, as contrasted with a truck, which is designed primarily for the transportation of finance service business in the fourth quarter. This operation was reclassified from the Corporate and Other segment to discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. in third quarter 2003. Financial Strength Highlights 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 $88 million from September September: see month. 30, 2003 to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.2 billion at December December: see month. 31, 2003. Total debt and preferred stock as a percentage of total capital improved to 33% 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. from 40% at December 31, 2002. Stockholders' equity increased to approximately $4.5 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 FASB Interpretation 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). In December 2003, the FASB modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. FIN 46, which was adopted for Aon's interest in variable interest entities (VIEs) that are special purpose entities (SPEs). As a result of the adoption of the required portion of FIN 46 in 2003, the Trust Preferred Capital Securities decreased by $702 million, offset by an increase in Notes Payable of $726 million and Assets of $24 million as of December 31, 2003. There was no effect on net income or consolidated equity as a result of this change and prior periods were not restated. Going forward, the dividends of the Trust Preferred will no longer be classified as 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, but rather pretax interest expense, netting to no effect on net income. 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 Pension costs for the major defined benefit plans Defined benefit plan A pension plan obliging the sponsor to make specified dollar payments to qualifying employees at retirement. The pension obligations are effectively the debt obligation of the plan sponsor. Related: Defined contribution plan increased by approximately $34 million pretax ($0.07 per share) in fourth quarter 2003 and $131 million ($0.26 per share) for full year 2003 compared to a year ago on a consolidated basis. Total cash contributions to the major defined benefit pension plans in 2003 increased by approximately $140 million, which included an early contribution of $100 million. 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 $0.05 per share in the quarter. Future Outlook Mr. Ryan commented, "The average of the analyst estimates for 2004 is that Aon will earn $2.17 per share. Based on our current outlook and earnings per share goal for 2004, we are comfortable that Aon can achieve or exceed this average estimate. Our EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. goal for 2004 does not include potential gains/losses from our Endurance warrants, gains/losses from possible divestitures and the potential conversion of our convertible debt into common shares." The Company will host an audio webcast on Wednesday Wednesday: see week. , February February: see month. 11th 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 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, 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 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. 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
Fourth Quarter Ended Twelve Months Ended
-------------------------- --------------------------
(millions except Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
per share data) 2003 2002 Change 2003 2002 Change
-------- -------- -------- -------- -------- --------
Revenue
-------
Brokerage
commissions
and fees $ 1,843 $ 1,694 9 % $ 6,884 $ 6,187 11 %
Premiums and
other 669 588 14 2,609 2,368 10
Investment
income 89 81 10 317 252 26
-------- -------- -------- -------- -------- --------
Total
revenue 2,601 2,363 10 9,810 8,807 11
-------- -------- -------- -------- -------- --------
Expenses
--------
General
expenses 1,876 1,705 10 7,123 6,459 10
Benefits to
policyholders 390 320 22 1,427 1,375 4
Interest
expense 22 33 (33) 101 124 (19)
Amortization of
intangible
assets 17 16 6 63 54 17
Unusual credits
- World Trade
Center (60) (11) N/A (14) (29) N/A
-------- -------- -------- -------- -------- --------
Total
expenses 2,245 2,063 9 8,700 7,983 9
-------- -------- -------- -------- -------- --------
Income From
Continuing
Operations Before
Income Tax and
Minority Interest 356 300 19 1,110 824 35
Provision for
income tax
(37% in 2003
and 2002) 132 110 20 411 304 35
-------- -------- -------- -------- -------- --------
Income From
Continuing
Operations
Before Minority
Interest 224 190 18 699 520 34
Minority
interest -
8.205% trust
preferred
capital
securities (9) (4) N/A (36) (34) N/A
-------- -------- -------- -------- -------- --------
Income From
Continuing
Operations 215 186 16 663 486 36
Loss From
Discontinued
Operations, net
of tax - (8) N/A (35) (20) N/A
-------- -------- -------- -------- -------- --------
Net Income $ 215 $ 178 21 % $ 628 $ 466 35 %
======== ======== ======== ======== ======== ========
Preferred stock
dividends (1) (1) - (3) (3) -
-------- -------- -------- -------- -------- --------
Net Income
Available for
Common
Stockholders $ 214 $ 177 21 % $ 625 $ 463 35 %
======== ======== ======== ======== ======== ========
Basic Per Share:
Income from
continuing
operations $ 0.67 $ 0.62 8 % $ 2.08 $ 1.72 21 %
Discontinued
operations - (0.03) N/A (0.11) (0.07) N/A
-------- -------- -------- -------- -------- --------
Net income $ 0.67 $ 0.59 14 % $ 1.97 $ 1.65 19 %
======== ======== ======== ======== ======== ========
Dilutive Per
Share:
Income from
continuing
operations $ 0.67 $ 0.62 8 % $ 2.08 $ 1.71 22 %
Discontinued
operations - (0.03) N/A (0.11) (0.07) N/A
-------- -------- -------- -------- -------- --------
Net income $ 0.67 $ 0.59 14 % $ 1.97 $ 1.64 20 %
======== ======== ======== ======== ======== ========
Dilutive
average common
and common
equivalent
shares
outstanding 319.3 299.0 317.8 282.6
======== ======== ======== ========
Aon Corporation
Segments - Fourth Quarter Continuing Operations
Fourth Quarter Ended
-------------------------------
(millions) Dec. 31, Dec. 31, Percent
2003 2002 Change
---------- ---------- ---------
Revenue
-------
Risk and insurance brokerage
services
Risk management and insurance
brokerage - Americas $ 640 $ 607 5 %
Risk management and insurance
brokerage - International 565 459 23
Reinsurance brokerage and related
services 202 189 7
Claims services 102 99 3
---------- ---------- ---------
Total risk and insurance
brokerage services 1,509 1,354 11
---------- ---------- ---------
Consulting
Benefits, compensation, management
and communications consulting 251 226 11
Human resource outsourcing 80 78 3
---------- ---------- ---------
Total consulting 331 304 9
---------- ---------- ---------
Insurance underwriting
Accident & health and life 402 394 2
Warranty, credit and property &
casualty 338 290 17
---------- ---------- ---------
Total insurance underwriting 740 684 8
---------- ---------- ---------
Corporate and other 40 21 90
Intersegment revenues (19) - N/A
---------- ---------- ---------
Total $ 2,601 $ 2,363 10 %
========== ========== =========
Investment Income (Included in Revenue above)
---------------------------------------------
Risk and insurance brokerage
services $ 19 $ 22 (14)%
Consulting 1 1 -
Insurance underwriting excluding
deposit-type contracts 29 35 (17)
Insurance underwriting -
deposit-type contracts - 2 (100)
Corporate and other 40 21 90
---------- ---------- ---------
Total $ 89 $ 81 10 %
========== ========== =========
Income (Loss) From Continuing Operations
Before Income Tax and Minority Interest
----------------------------------------
Risk and insurance brokerage
services (3) $ 237 $ 249 (5)%
Consulting 47 44 7
Insurance underwriting 11 44 (75)
Corporate and other 61 (37) N/A
---------- ---------- ---------
Total $ 356 $ 300 19 %
========== ========== =========
Income From Continuing Operations
Before Income Tax - Margins
---------------------------------
Risk and insurance brokerage
services 15.7% 18.4%
Consulting 14.2% 14.5%
Insurance underwriting 1.5% 6.4%
Total 13.7% 12.7%
Aon Corporation
Segments - Fourth Quarter Continuing Operations
Fourth Quarter Ended
----------------------------------------------
(millions) Less:
Less: Acquisitions, Less: Organic
Currency Divestitures All Revenue
Impact & Transfers Other (1) Growth (2)
---------- ------------- ---------- ----------
Revenue
-------
Risk and insurance
brokerage services
Risk management and
insurance brokerage -
Americas 2 % - % (3)% 6 %
Risk management and
insurance brokerage -
International 15 (5) 2 11
Reinsurance brokerage
and related services 4 1 (3) 5
Claims services 2 4 - (3)
---------- ------------- ---------- ----------
Total risk and
insurance
brokerage services 7 (1) (2) 7
---------- ------------- ---------- ----------
Consulting
Benefits, compensation,
management and
communications
consulting 5 2 3 1
Human resource
outsourcing 3 - 3 (3)
---------- ------------- ---------- ----------
Total consulting 5 2 2 -
---------- ------------- ---------- ----------
Insurance underwriting
Accident & health and
life 5 (3) - -
Warranty, credit and
property & casualty 5 5 (15) 22
---------- ------------- ---------- ----------
Total insurance
underwriting 5 - (6) 9
---------- ------------- ---------- ----------
Corporate and other N/A N/A N/A N/A
Intersegment revenues N/A N/A N/A N/A
---------- ------------- ---------- ----------
Total 6 % (1)% (2)% 7 %
========== ============= ========== ==========
(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.
(3) Includes World Trade Center related credits of $11 million for the
fourth quarter ended December 31, 2002.
Aon Corporation
Segments - Year-to-date Continuing Operations
Twelve Months Ended
--------------------------------
(millions) Dec. 31, Dec. 31, Percent
2003 2002 Change
--------------------------------
Revenue
-------
Risk and insurance brokerage services
Risk management and insurance
brokerage - Americas $ 2,299 $ 2,106 9 %
Risk management and insurance
brokerage - International 2,074 1,695 22
Reinsurance brokerage and related
services 902 790 14
Claims services 402 382 5
--------- --------- ---------
Total risk and insurance
brokerage services 5,677 4,973 14
--------- --------- ---------
Consulting
Benefits, compensation, management
and communications consulting 898 796 13
Human resource outsourcing 295 258 14
--------- --------- ---------
Total consulting 1,193 1,054 13
--------- --------- ---------
Insurance underwriting
Accident & health and life 1,594 1,639 (3)
Warranty, credit and property &
casualty 1,289 1,162 11
--------- --------- ---------
Total insurance underwriting 2,883 2,801 3
--------- --------- ---------
Corporate and other 125 (21) N/A
Intersegment revenues (68) - N/A
--------- --------- ---------
Total $ 9,810 $ 8,807 11 %
========= ========= =========
Investment Income (Included in Revenue above)
---------------------------------------------
Risk and insurance brokerage
services $ 75 $ 109 (31)%
Consulting 2 2 -
Insurance underwriting excluding
deposit-type contracts 111 131 (15)
Insurance underwriting -
deposit-type contracts 4 31 (87)
Corporate and other 125 (21) N/A
--------- --------- ---------
Total $ 317 $ 252 26 %
========= ========= =========
Income (Loss) From Continuing Operations
Before Income Tax and Minority Interest
----------------------------------------
Risk and insurance brokerage
services (3) $ 829 $ 791 5 %
Consulting 108 120 (10)
Insurance underwriting 196 155 26
Corporate and other (23) (242) N/A
--------- --------- ---------
Total $ 1,110 $ 824 35 %
========= ========= =========
Income From Continuing Operations
Before Income Tax - Margins
----------------------------
Risk and insurance brokerage
services 14.6% 15.9%
Consulting 9.1% 11.4%
Insurance underwriting 6.8% 5.5%
Total 11.3% 9.4%
Aon Corporation
Segments - Year-to-date Continuing Operations
Twelve Months Ended
----------------------------------------------
(millions) Less:
Less: Acquisitions, Less: Organic
Currency Divestitures All Revenue
Impact & Transfers Other (1) Growth (2)
---------- ------------- ---------- ----------
Revenue
-------
Risk and insurance
brokerage services
Risk management and
insurance brokerage
- Americas 1 % - % (1)% 9 %
Risk management and
insurance brokerage
- International 13 (2) - 11
Reinsurance brokerage
and related services 5 - (1) 10
Claims services 3 1 1 -
---------- ------------- ---------- ----------
Total risk and
insurance
brokerage
services 6 - (1) 9
---------- ------------- ---------- ----------
Consulting
Benefits,
compensation,
management and
communications
consulting 5 - 4 4
Human resource
outsourcing 2 - 3 9
---------- ------------- ---------- ----------
Total consulting 4 - 4 5
---------- ------------- ---------- ----------
Insurance underwriting
Accident & health and
life 3 (4) (2) -
Warranty, credit and
property & casualty 3 - (10) 18
---------- ------------- ---------- ----------
Total insurance
underwriting 3 (2) (6) 8
---------- ------------- ---------- ----------
Corporate and other N/A N/A N/A N/A
Intersegment revenues N/A N/A N/A N/A
---------- ------------- ---------- ----------
Total 5 % (1)% (1)% 8 %
========== ============= ========== ==========
(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.
(3) Includes World Trade Center related credits of $29 million for the
twelve months ended December 31, 2002.
Aon Corporation
Corporate and Other - Continuing Operations
Fourth Quarter Ended Twelve Months Ended
-------------------------- --------------------------
(millions) Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
2003 2002 Change 2003 2002 Change
-------- -------- -------- -------- -------- --------
Revenue
-------
Income from
marketable
equity
securities and
other
investments
(1) $ 36 $ 17 112 % $ 137 $ 31 342 %
Limited
partnership
investments - - - 1 14 (93)
Interest on
tax refund - - - - 48 (100)
Net gain
(loss) on
disposals and
related
expenses (2) 4 4 - (13) (114) N/A
-------- -------- -------- -------- -------- --------
Total
revenue 40 21 90 125 (21) N/A
Expenses
--------
General
expenses 17 25 (32) 61 97 (37)
Interest
expense 22 33 (33) 101 124 (19)
Unusual
credits -
World Trade
Center (60) - N/A (14) - N/A
-------- -------- -------- -------- -------- --------
Total
expenses (21) 58 N/A 148 221 (33)
-------- -------- -------- -------- -------- --------
Income (loss)
before income
tax $ 61 $ (37) N/A % $ (23) $ (242) N/A %
======== ======== ======== ======== ======== ========
(1) Includes income of $16 million and $80 million related to changes
in the value of warrants held by the company in Endurance
Specialty for the fourth quarter and twelve months ended December
31, 2003, respectively, as well as $18 million and $46 million
from a common equity interest in Endurance for the fourth quarter
and twelve months ended December 31, 2003, respectively. Income
from the common equity interest in Endurance for the fourth
quarter and twelve months ended December 31, 2002 was $14 million
and $21 million, respectively.
(2) Includes impairment writedowns of $2 million and $10 million for
the fourth quarters ended December 31, 2003 and 2002,
respectively, and $36 million and $130 million (including $51
million cumulative adjustment relating to prior financial
reporting periods) for the twelve months ended December 31, 2003
and 2002, respectively.
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