Aon Study: Homeowners Insurance Still Not Earning Its Cost of Capital.

Business Editors

CHICAGO--(BUSINESS WIRE)--Oct. 3, 2002

Aon Corporation (NYSE: AOC) announced today the results of Aon Re Worldwide's comprehensive study of the U.S. homeowners marketplace. The results of the study reveal that the homeowners insurance industry, despite recent rate and underwriting actions, cannot reasonably expect to earn its cost of capital. While the personal lines insurance industry's cost of capital ranges from 11% to 13%, the homeowners line after considering rate and underwriting actions filed through May / June 2002 is returning only 4.8% on capital. The study also shows that further homeowner rate increases or other underwriting actions may need to be taken by insurers to fully recover the cost of capital.

This study is the first of its kind by Aon Re Worldwide and was undertaken to quantify the economic status of the market given the considerable rate increases and other underwriting changes that have occurred recently. These rate increases follow announcements of poor financial results for significant portions of the homeowners insurance industry that has suffered from catastrophes and tough competition among its carriers. The study also showed that homeowners insurers have made substantial progress from the lowest point in the current homeowners insurance crisis. Aon has developed a suite of tools to help insurers cope with the complex analytics that are now associated with the homeowners line.

This comprehensive study included a review of the rate filings of the top five homeowners insurers in each state for the states that represent 80% of the U.S. population. Aon plans semi-annual updates of the study until this important market stabilizes.

Aon Re Worldwide provides traditional, alternative risk transfer and capital markets based reinsurance advisory and execution services to insurers and reinsurers. Aon Re Worldwide's client advisory services include dynamic financial analysis, rating agency capital modeling assistance, capital allocation and optimization services, catastrophe modeling services, regulatory assistance, tax planning and capital markets structuring, and placement services.

Aon Corporation (www.aon.com) is a holding company that is comprised of a family of insurance brokerage, consulting and insurance underwriting subsidiaries. Aon does not write homeowners insurance.

This press release may contain certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act 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, changes in commercial property and casualty premium rates, the competitive environment, the actual cost of resolution of contingent liabilities and other loss contingencies, the final execution of the business transformation plan, the ultimate cost and timing of the implementation thereof, the actual cost savings and other benefits resulting therefrom, whether the Company ultimately disposes of some or all of its underwriting operations, the terms and timing thereof, rating agency actions, the cost and availability of debt and other financing, 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.