Aon Reports Third Quarter 2001 Earnings; Updates on Business Transformation, Impact of September 11 Attacks and Spin-off Plans.Business Editors CHICAGO--(BUSINESS WIRE)--Nov. 7, 2001 Aon Corporation (NYSE NYSE See: New York Stock Exchange : AOC AOC, n an acronym for the Aromatherapy Organizations Council. ) today reported third quarter dilutive earnings per share of $0.38 before charges related to the events of September 11, 2001, compared with $0.53 in third quarter 2000. Excluding September 11 charges and non-operating corporate segment revenue, third quarter 2001 dilutive earnings were $0.37 per share versus $0.47 per share a year ago. Reported net income and dilutive earnings per share for third quarter 2001 were $72 million and $0.26, respectively, compared with $139 million and $0.53 in the year ago period. September 11 related charges not covered not covered Health care adjective Referring to a procedure, test or other health service to which a policy holder or insurance beneficiary is not entitled under the terms of the policy or payment system–eg, Medicare. Cf Covered. by the Company's insurance program were $53 million pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern in the third quarter or $0.12 per share. The Company stated in its September 17th press release that third quarter earnings would be unfavorably impacted by the events of September 11, slower revenue growth in U.S. retail brokerage business due to the implementation of the business transformation plan, and slower organic revenue growth in the Consulting segment. Patrick G. Ryan, chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , said, "There were unanticipated challenges and delays in certain parts of our U.S. retail business transformation process that were compounded by the September 11 attacks September 11 attacks Series of airline hijackings and suicide bombings against U.S. targets perpetrated by 19 militants associated with the Islamic extremist group al-Qaeda. on the World Trade Center. Client service is our primary focus and we have incurred additional costs, including expenses to run parallel systems longer than we expected. A concerted effort is being made to finish conversions to the new operating platform that will not only enhance client service, but also drive efficiencies. This, in turn, will increase our capacity to win new accounts and lead to better financial performance. Tempering tempering, process involving slow and moderate heating to increase the hardness and toughness of metals that have undergone previous heat treatment. Metals are usually hardened (see hardening) by being heated to high temperatures and quenched rapidly. this improvement in the near-term will be the negative influences of the WTC WTC World Trade Center, see there disaster on our Company." Ryan added, "Most of our individual operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon performed well in the third quarter and our global franchise remains strong. I am confident about Aon's long-term success." Detailed Discussion of Third Quarter and Nine Months Financial Results Consolidated revenue of $1.9 billion in the third quarter increased 7% from the prior year, due in part to acquisitions. Further reductions in 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. and unfavorable equity markets negatively impacted investment income. Adjusting for foreign currency translation, revenue growth was 9%. Aon's operating segments - Insurance Brokerage 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 third quarter revenue of $1.9 billion, up 8% from the prior year. Adjusted for foreign currency translation, third quarter total operating segment revenues increased 10%. Operating segment investment income decreased $6 million to $102 million from $108 million in third quarter 2000 due partly to declining interest rates. Total operating segment pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. , before charges related to the events of September 11, was $262 million compared with $290 million in third quarter 2000. For the nine months, operating segment pretax income, before charges from September 11 and special charges related to the business transformation plan, grew 2% to $855 million, up from $840 million in 2000. 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. Third quarter reported Insurance Brokerage and Other Services segment revenue grew 7% to $1.112 billion compared with $1.042 billion in 2000. Adjusted for foreign currency translation, revenue growth was 8%. Organic revenue growth was 6% in the quarter, principally reflecting slower new business growth in U.S. retail brokerage due in part to unexpected complications and delays in the implementation of the business transformation plan and the events of September 11. Claims services and international and wholesale brokerage continued to post solid revenue growth. Insurance Brokerage and Other Services pretax income before charges related to September 11 was $153 million compared with $183 million in third quarter 2000. The pretax margin in third quarter 2001 was 13.8% compared with 17.6% in the year ago period. Slower new business growth and higher lost business in U.S. retail brokerage principally affected margin comparisons. Higher than anticipated costs, due partly to running parallel systems as part of the business transformation plan, also contributed to the margin decline. As full conversions to new processes are completed, these added costs are expected to lessen less·en v. less·ened, less·en·ing, less·ens v.tr. 1. To make less; reduce. 2. Archaic To make little of; belittle. v.intr. To become less; decrease. starting in second quarter 2002. While lost business was more than year ago levels, mostly due to voluntary and involuntary involuntary adj. or adv. without intent, will, or choice. Participation in a crime is involuntary if forced by immediate threat to life or health of oneself or one's loved ones, and will result in dismissal or acquittal. INVOLUNTARY. employee departures, it was only slightly more than expectations. Recent hiring of new business development professionals is expected to improve new account generation in future periods. Recent acquisitions focused on enhancing Aon's 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. capabilities (e.g. 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, claims services and safety engineering) also factored into revenue and expense comparisons. As these new services are assimilated and then distributed through Aon's global distribution network, they are expected to positively impact future revenue growth and margin comparisons. Consulting segment reported revenues rose 27% to $232 million from $182 million in the year-ago third quarter. 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. (ASA Asa (ā`sə), in the Bible, king of Judah, son and successor of Abijah. He was a good king, zealous in his extirpation of idols. When Baasha of Israel took Ramah (a few miles N of Jerusalem), Asa bought the help of Benhadad of Damascus and ), acquired in fourth quarter 2000, and ASI ASI, n See Anxiety Sensitivity Index. Solutions Incorporated (ASI), acquired in second quarter 2001. Consulting segment organic revenue growth was 4% for the quarter due to a slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in hiring by some of our clients and the impact of September 11. Pretax income before September 11 charges rose 12% to $29 million versus $26 million in third quarter 2000. The Consulting pretax margin was 12.5% in the third quarter versus 14.3% in the year ago period, reflecting the impact of acquisitions and slower organic revenue growth in the human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. consulting business. The employee benefits area showed good performance in the quarter. The recent acquisitions of ASA and ASI give Aon unmatched capabilities to deliver human resource outsourcing solutions to corporate clients. The Company expects that demand for these services will grow as companies seek lower cost, higher quality human capital solutions that improve their overall productivity. Insurance Underwriting segment reported revenues increased 5% to $565 million in third quarter 2001, up from $536 million in third quarter 2000, reflecting the continued development of new product initiatives and a higher volume of business in accident and health products. Adjusted for foreign currency translation, revenues increased 7%. Insurance Underwriting pretax income before September 11 related charges was $80 million in the third quarter versus $81 million in the prior year period. The Underwriting pretax margin was 14.2% for the quarter versus 15.1% in third quarter 2000. A decline in investment income, due in part to lower interest rates, affected margin comparisons. Corporate and Other segment revenue, comprised primarily of equity-related revenues from limited partnerships and directly owned equities, was $3 million for the quarter compared with $25 million in third quarter 2000. Reduced Corporate revenue was primarily due to lower increases in limited partnership values compared to the same quarter a year ago. The Corporate and Other segment pretax loss pretax loss A loss reported before tax benefits are considered. for the quarter was $76 million, compared with a pretax loss of $46 million in the prior year quarter due primarily to the decline in Corporate and Other segment revenue. Corporate segment general expenses increased relative to the prior year due in part to duplicate DUPLICATE. The double of anything. 2. It is usually applied to agreements, letters, receipts, and the like, when two originals are made of either of them. Each copy has the same effect. occupancy costs Occupancy costs are the whole life costs of buildings and their associated land from occupancy until disposal. These costs may be incurred on a regular or irregular basis. Occupancy costs are those costs related to occupying a space including; rent, real estate taxes, personal involving major moves to new office space and benefits involving the sale of a business in third quarter 2000. Total debt at September 30, 2001 was $1.85 billion, down from $2.28 billion at September 30, 2000. Nine months 2001 net income and dilutive earnings per share were $120 million and $0.44, respectively, compared with $384 million and $1.46 in the year ago period. Excluding 2001 special charges related to the previously announced business transformation plan of $0.49 per share, charges related to the events of September 11 of $0.12 per share, and the adoption of SAB SAB Spontaneous abortion. See Abortion. 101 in 2000 ($0.03 per share), nine months 2001 earnings were $1.05 per share compared with $1.49 per share in nine months 2000. The Corporate segment nine months revenue decline of $173 million, or $0.40 per share, from a positive $77 million to a negative $96 million was a major factor in the year-over-year decline in earnings per share. Corporate revenue reflects the performance of the Company's equity investments that were negatively impacted by stock market declines. Business Transformation Update Aon's business transformation plan was announced in November 2000 with goals to enhance client service, accelerate organic revenue growth and reduce costs. "We remain convinced that the business transformation plan will produce significant benefits," Ryan stated. "While we are disappointed by the setbacks in the third quarter, we believe we will achieve 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. savings of between $150 million and $200 million in 2002." In U.S. retail brokerage, the business transformation entailed: process redesign re·de·sign tr.v. re·de·signed, re·de·sign·ing, re·de·signs To make a revision in the appearance or function of. re following the rollout of a new policy management and accounting system, job redesign based on functional expertise and the creation of four new Client Service Business Units (CSBUs). Significant implementation steps were taken through second quarter 2001. These steps included: notifications of job eliminations, hiring of new employees at new job grades and locations, the creation of specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. syndication See syndication format. groups to handle the placement of insurance coverage with insurance carriers, the establishment of new business development and relationship management groups, and the building of four CSBUs (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 City-World Trade Center, Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , Houston and Glenview, Illinois There are at least two locations in Illinois called Glenview:
In third quarter 2001, a significant acceleration of process and file conversions to the CSBUs was planned. These conversions fell behind schedule due to unexpected challenges in handling higher volumes of transfers between field operations and the CSBUs, and steps were being taken prior to September 11 to improve the conversion process. The delays reduced cost savings and put pressure on regional offices that had to maintain parallel systems to ensure quality client service which resulted in duplicate costs. This also adversely affected new business production in the quarter as attention was diverted di·vert v. di·vert·ed, di·vert·ing, di·verts v.tr. 1. To turn aside from a course or direction: Traffic was diverted around the scene of the accident. 2. from generating new accounts to completing client conversions. The most established CSBU CSBU Commercial Services Business Unit was housed within the World Trade Center (WTC) - Aon's largest U.S. retail brokerage branch. When the WTC was destroyed on September 11, client servicing was immediately rerouted to other CSBUs. This transfer was more easily accomplished because of increased electronic document management completed under the business transformation design. The World Trade Center CSBU has now been relocated re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. to midtown mid·town n. A central portion of a city, between uptown and downtown. midtown Noun US & Canad the centre of a town Manhattan along with a majority of the WTC retail brokerage staff. We continue to maintain quality client service while reestablishing our business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets in this interim space. The September 11 events, however, have exacerbated the delays in converting to the CSBUs. A dedicated effort is currently underway to fully convert client servicing for U.S. retail brokerage accounts Brokerage Account An arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through the brokerage, which then carries out the transactions on the investor's behalf. to the four CSBUs by second quarter 2002 which will involve unanticipated, one-time costs in fourth quarter 2001 and the first half of 2002. The business transformation in U.S. retail brokerage also involved changes in job roles and responsibilities focusing on: new sales, relationship management, syndication of business to insurance carriers, client service and product specialization A career option pursued by some attorneys that entails the acquisition of detailed knowledge of, and proficiency in, a particular area of law. As the law in the United States becomes increasingly complex and covers a greater number of subjects, more and more attorneys are . Employees were advised of their new roles late in the first quarter and in the second quarter and were still progressing in terms of conducting their own new jobs, and learning how their new roles interrelated in·ter·re·late tr. & intr.v. in·ter·re·lat·ed, in·ter·re·lat·ing, in·ter·re·lates To place in or come into mutual relationship. in with other employees' new responsibilities. Some of the complexities of the job reorganization added to the CSBU conversion delay, which along with the September 11 events, resulted in unsatisfactory financial performance in the third quarter. The Company does not anticipate any additional special charges for the business transformation program beyond the $300 million already taken. Total costs including both special charges and transition costs for the business transformation are expected to exceed the upper range of the original total cost estimate due to these additional transition costs. The business transformation challenges are manageable and steps are already being taken to significantly improve performance. As the conversion process between the regional offices and the CSBUs is completed and employees become more familiar with their new job roles, the Company expects the creation of significant additional capacity to produce new business that will further the goals of the business transformation plan. Michael D. O'Halleran, president and COO (Cell Of Origin) See mobile positioning. of Aon Corporation, stated, "We are totally committed to the business transformation program. We undertook industry-leading changes in our operating model Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. designed to improve service for our clients and create operating efficiencies. Implementation of certain steps in U.S. retail brokerage have lagged our initial timeline and new account generation and expenses have suffered in the near-term, but we have enormous talent and resources in our organization and our long-term prospects are very positive. I look forward to directly leading and reinvigorating our efforts." Impact of September 11, 2001 Consolidated pretax charges related to the events of September 11 were $53 million, or $0.12 per share, and were recorded in third quarter 2001. The charges were principally comprised of $45 million of insurance benefits, net of approximately $147 million of 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. , provided under life insurance policies issued by Aon's Combined Insurance Company subsidiaries for Aon employees. As to approximately $90 million of such reinsurance recoverables, issues have recently been raised by reinsurers and the Company is in discussions regarding those issues. Charges also included extended medical benefits of $7 million provided to the families of deceased deceased 1) adj. dead. 2) n. the person who has died, as used in the handling of his/her estate, probate of will and other proceedings after death, or in reference to the victim of a homicide (as: "The deceased had been shot three times. employees. Aon is still in the process of presenting additional insurance claims for losses related to the WTC to its insurers. The Company expects additional recoveries in future periods from its insurance policies that cover the value of destroyed assets and the continuing excess and extra costs related to 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. . Aon has secured major temporary office space in midtown Manhattan to accommodate the majority of the employees displaced displaced see displacement. by September 11 and has also relocated employees to alternative NYC NYC abbr. New York City NYC New York City metropolitan offices. The vast majority of our employees have returned to work and information technology systems and applications, as well as telecommunications services In telecommunication, the term telecommunications service has the following meanings: 1. Any service provided by a telecommunication provider. 2. for these employees, have been provided. "Given the magnitude of the loss of life and destruction at the World Trade Center, we will never know the full impact of this tragedy," Ryan said. "We are not looking back though - we are looking ahead. Our employees have exhibited incredible strength, character and resolve to move forward and it is this commitment that gives me great confidence in our future success." "From a broader industry perspective, the terrorist attacks of September 11 have placed insurance and risk management issues in the spotlight," Ryan also noted. "The September 11 events have caused fundamental changes to the insurance industry beyond the mere hardening hardening, in metallurgy, treatment of metals to increase their resistance to penetration. A metal is harder when it has small grains, which result when the metal is cooled rapidly. of the market that was witnessed prior to September 11. Aon is well-positioned as a leader in designing and delivering solutions that help address the unique risk management, human capital and insurance challenges our clients face in this new environment." 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. Update and Property and Casualty Initiative In April 2001, the Company announced plans to spin-off its underwriting operations to stockholders through a new company to be named Combined Specialty Corporation. On October 12th, Aon announced plans to expand its underwriting operations to include direct property and casualty insurance and reinsurance policies to meet clients' growing demand for insurance coverage. These expanded operations are intended to be part of the spin-off and will require the raising of additional capital. A separate release to be issued later today will provide additional information concerning Aon's strategy for property and casualty underwriting. The Company is currently involved in the customary review process with the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. for a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax-free ruling for the planned spin-off. Customary SEC filings will be made by the Company regarding the spin-off and will be sent to stockholders. The spin-off is expected to be completed by Spring 2002 and requires final Board approval. "The shortage of capacity in the insurance market created by the events of September 11 have led Aon to expand the types of underwriting that we will support," stated Ryan. Future Outlook "Visibility into near-term financial results has been obscured by a number of factors, both external and internal," said Ryan. "Our company was shaken
Shaken (車剣, also known as kurumaken) are a type of Shuriken by the events of September 11, and we are completing important implementation steps for our business transformation. The insurance industry is undergoing unprecedented change and the need for our services has never been greater. In addition to providing risk management expertise, we are working to deliver additional underwriting capacity that will be included under our planned spin-off. Simultaneously, we are witnessing a decline in global economies, volatile equity markets and sinking interest rates." "Most of our business units are performing well and dramatically increasing premium rates are expected to have a positive effect on brokerage commissions and fees. However, Aon's fourth quarter 2001 Corporate segment revenue will be negatively impacted by the equity market decline. Lower interest rates will pressure investment income and policy extensions may delay billings for some annual renewals to 2002 due to insurance capacity constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. and stricter underwriting. Implementation of the U.S. retail brokerage transformation will continue and additional unplanned costs will be incurred. Start-up costs will also be incurred to initiate the expansion of property and casualty underwriting, but 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. from this new P&C growth is not expected until 2002." "For 2002, earnings visibility is challenging for many of the same reasons. We believe, however, that we will benefit from increasing premium rates and the completion during 2002 of our business transformation in U.S. retail brokerage, which will give the Company sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz  a·ble·ness n. savings and increased capacity for new account generation,"
Ryan said. "Assuming that the equity markets improve from current
levels and we achieve a mid-single digit return next year on our equity
portfolio, we believe that a double-digit increase in earnings per share
from $2.01 in 2000 is achievable in 2002, excluding the elimination of
goodwill amortization that will add another $0.36 per share to this
increase."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, Chicago, Frankfurt and London stock exchanges London Stock Exchange London 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. , and events surrounding terrorists attacks of September 11, 2001, including the timing and resolution of related insurance and reinsurance issues. Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results are contained in the Company's filings with the Securities and Exchange Commission.
Aon Corporation
Consolidated Summary of Operations
Third Quarter Ended Nine Months Ended
------------------- -----------------
(millions except
per share data)
Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
2001 2000 Change 2001 2000 Change
---- ---- ------ ---- ---- ------
Revenue
Brokerage
commissions
and fees $ 1,297 $ 1,176 10 % $ 3,925 $ 3,584 10 %
Premiums and
other 510 476 7 1,510 1,435 5
Investment
income 105 133 (21) 205 395 (48)
----- ----- ----- ----- ----- -----
Total revenue 1,912 1,785 7 5,640 5,414 4
----- ----- ----- ----- ----- -----
Expenses
General
expenses 1,384 1,208 15 4,085 3,741 9
Benefits to
policyholders 271 257 5 823 766 7
Interest
expense 31 38 (18) 98 102 (4)
Amortization of
intangible assets 40 38 5 118 115 3
----- ----- ----- ----- ----- -----
Total expenses 1,726 1,541 12 5,124 4,724 8
----- ----- ----- ----- ----- -----
Income Before
Unusual &
Special Charges 186 244 (24) 516 690 (25)
Unusual charges -
World Trade
Center (53) - N/A (53) - N/A
Special charges - - - (218) - N/A
----- ----- ----- ----- ----- -----
Income Before Income
Tax, Minority Interest
and Accounting
Change 133 244 (45) 245 690 (64)
Provision for
income tax 51 95 (46) 95 269 (65)
----- ----- ----- ----- ----- -----
Income Before Minority
Interest and
Accounting
Change 82 149 (45) 150 421 (64)
Minority interest -
8.205% trust
preferred capital
securities (10) (10) - (30) (30) -
----- ----- ----- ----- ----- -----
Income Before
Accounting
Change 72 139 (48) 120 391 (69)
Cumulative effect of
change in accounting
principle, net of
tax (1) - - - - (7) N/A
----- ----- ----- ----- ----- -----
Net Income $ 72 $ 139 (48)% $ 120 $ 384 (69)%
===== ===== ===== ===== ===== =====
Preferred stock
dividends (1) (1) - (2) (2) -
----- ----- ----- ----- ----- -----
Net Income Available
for Common
Stockholders $ 71 $ 138 (49)% $ 118 $ 382 (69)%
===== ===== ===== ===== ===== =====
Net Income Per Share:
Basic net income
per share $ 0.26 $ 0.53 (51)% $ 0.44 $ 1.47 (70)%
===== ===== ===== ===== ===== =====
Dilutive net income per share:
Net income before
unusual and
special
charges $ 0.38 $ 0.53 (28)% $ 1.05 $ 1.49 (30)%
Unusual charges -
World Trade
Center (0.12) - N/A (0.12) - N/A
Special charges - - - (0.49) - N/A
Cumulative effect of
change in
accounting
principle (1) - - - - (0.03) N/A
----- ----- ----- ----- ----- -----
Dilutive net income
per share $ 0.26 $ 0.53 (51)% $ 0.44 $ 1.46 (70)%
===== ===== ===== ===== ===== =====
Dilutive average common
and common equivalent
shares
outstanding 275.4 262.8 271.0 261.7
===== ===== ===== =====
(1) Adoption of SEC Staff Accounting Bulletin 101, effective January
1, 2000.
Aon Corporation
Operating Segments
Third Quarter Ended Nine Months Ended
------------------- -----------------
(millions) Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
2001 2000 Change 2001 2000 Change
---- ---- ------ ---- ---- ------
Revenue
Insurance brokerage
and other
services (1) $ 1,112 $ 1,042 7 % $ 3,383 $ 3,181 6 %
Consulting (2) 232 182 27 673 538 25
Insurance
underwriting 565 536 5 1,680 1,618 4
----- ----- ----- ----- ----- -----
Total revenue $ 1,909 $ 1,760 8 % $ 5,736 $ 5,337 7 %
===== ===== ===== ===== ===== =====
Income Before
Income Tax
Insurance brokerage
and other
services $ 153 $ 183 (16)% $ 544 $ 545 (0)%
Consulting 29 26 12 84 68 24
Insurance
underwriting 80 81 (1) 227 227 -
----- ----- ----- ----- ----- -----
Total income before
income tax excluding
unusual and special
charges 262 290 (10) 855 840 2
World Trade Center
charges (53) - N/A (53) - N/A
Special charges - - N/A (218) - N/A
----- ----- ----- ----- ----- -----
Total income before
income tax $ 209 $ 290 (28)% $ 584 $ 840 (30)%
===== ===== ===== ===== ===== =====
(1) Includes investment income of $46 million and $47 million for the
third quarter ended September 30, 2001 and 2000, respectively, and
$127 million and $132 million for the nine months ended September
30, 2001 and 2000, respectively.
(2) Includes investment income of $1 million and $2 million for the
third quarter ended September 30, 2001 and 2000, respectively, and
$4 million for both the nine months ended September 30, 2001 and
2000.
Aon Corporation
Corporate and Other
Third Quarter Ended Nine Months Ended
------------------- -----------------
(millions) Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
2001 2000 Change 2001 2000 Change
---- ---- ------ ---- ---- ------
Corporate and other
revenue (1) $ 3 $ 25 (88)% $ (96) $ 77 N/A %
Non operating expenses
Amortization of
goodwill $ 30 $ 29 3 % $ 88 $ 85 4 %
Interest expense 31 38 (18) 98 102 (4)
General expenses 18 4 350 57 40 43
---- ----- ----- ---- ----- -----
Loss before
income tax $ (76) $ (46) N/A % $ (339) $ (150) N/A %
==== ===== ===== ==== ===== =====
Third Quarter Ended Nine Months Ended
------------------- -----------------
(millions) Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
2001 2000 Change 2001 2000 Change
---- ---- ------ ---- ---- ------
(1) Components of corporate
and other revenue
Change in valuation
on private limited
partnership
investments $ 7 $ 15 (53)% $ (56) $ 75 N/A %
Income from marketable
equity securities
and other
investments 2 2 - 6 6 -
----- ----- ----- ----- ----- -----
Corporate and other
revenue before income
(loss) on disposals
and related
expenses 9 17 (47) (50) 81 N/A
Income (loss) on
disposals and
related expenses (6) 8 N/A (46)(a) (4) N/A
----- ----- ----- ----- ----- -----
Corporate and other
revenue $ 3 $ 25 (88)% $ (96) $ 77 N/A %
===== ===== ===== ===== ===== =====
(a) Includes impairment writedowns of $29 million in first quarter
2001.
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