Aon Study: Homeowners ROE Still Improving but at Slower Rate.

Business Editors

CHICAGO--(BUSINESS WIRE)--Oct. 28, 2003

Aon (NYSE:AOC) announced today the results of Aon Re Worldwide's second follow-up study of return on capital in the U.S. Homeowners insurance marketplace. The results of the study reveal further improvement in expected return, although the rate of improvement has slowed. The Homeowners insurance line continues to produce a prospective return on equity (ROE) that is substantially less than its cost of capital.

The findings of the update indicate that the Homeowners insurance industry is estimated to have increased its rates by 4.8% in the first half of 2003, vs. 7.8% in the prior six months. The average increase for new rate filings in the last six months was 11.1%, vs. 12.5% in the prior six months. Based on filings through June/July 2003, the estimated prospective ROE for Homeowners lines is 6.3% compared to six months ago when the expected return was 5.9%. A year ago the expected return was 4.8%. This update for the first time includes rate filing information for the state of Texas, and takes into consideration rate reductions recently ordered in that state.

This study by Aon Re is the third in a series to provide an update on the economic status of the market given the history of inadequate or negative returns experienced by many Homeowners insurance providers, and the challenges faced by companies in order to continue to provide this coverage. The study provides a prospective look taking into consideration changes that have been filed, and is adaptable to assess prospective return on capital for individual companies. The study shows that the outlook for Homeowners insurers is improving, but further actions to improve underwriting results and management of capital are needed. Aon offers a suite of tools to help insurers cope with the complex operational and financial issues that are now associated with the Homeowners line.

The analysis involved with this comprehensive study includes 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 to continue annual updates of the study hereafter.

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 analysis and capital markets structuring, and placement services. Aon does not underwrite Homeowners insurance business.

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 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, exchange rates, rating agency actions, pension funding, changes in commercial property and casualty markets and commercial premium rates, the competitive environment, the actual cost of resolution of contingent liabilities and other loss contingencies, the ultimate impact of the business transformation plan, 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.