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Aon Reports Third Quarter 2008 Results
Total Revenue grew 6% to $1.8 billion with Organic Revenue growth of 2%
EPS from Continuing Operations increased 27% to $0.52
Chicago
NYSE: AOC

 

Aon Reports Third Quarter 2008 Results

     - Total Revenue grew 6% to $1.8 billion with Organic Revenue growth of 2%

     - EPS from Continuing Operations increased 27% to $0.52

     Third Quarter Highlights

     - EPS from continuing operations, excluding certain items, increased 33%
       to $0.69

     - Total pretax margin was 11.5% and the adjusted pretax margin, excluding
       certain items, increased 140 bps to 15.1%

     - Consulting revenue grew 4% with organic growth in commissions, fees and
       other of 6%

     - Consulting pretax margin was 15.4% and the adjusted pretax margin,
       excluding certain items, increased 370 basis points to 15.7%

     - Repurchased $426 million or 9.3 million shares of common stock

     - Increased total annual savings related to the 2007 restructuring
       program by $60 million to $300 million, and costs necessary to achieve
       savings by $90 million to $450 million

     - As previously announced, entered into a definitive agreement to acquire
       Benfield Group for 844 million British pound in cash, and
       assume 91 million British pound of Benfield Group debt

CHICAGO, Oct. 31 /PRNewswire-FirstCall/ -- Aon Corporation (NYSE: AOC) today reported results for the third quarter ended September 30, 2008.

Net income decreased 43% to $117 million or $0.40 per share, compared to $204 million or $0.64 per share for the prior year quarter, including the impact of businesses moved to discontinued operations. Net income from continuing operations increased 18% to $153 million or $0.52 per share, compared to $130 million or $0.41 per share for the prior year quarter. Net income from continuing operations per share, excluding certain items, increased 33% to $0.69 compared to $0.52 for the prior year quarter. Certain items that impacted third quarter results and comparisons with the prior year quarter are detailed in the reconciliation of non-GAAP measures on page 11 of this press release.

"We are pleased to deliver results that demonstrate continued progress in each of our key metrics: organic growth was two percent, adjusted pretax margin increased 140 basis points and adjusted earnings per share from continuing operations increased 33%. These results were achieved despite soft market conditions globally and unprecedented turmoil in the insurance industry," said Greg Case, president and chief executive officer, Aon Corporation. "Driven by a commitment to expense discipline, we increased savings related to our 2007 restructuring program by $60 million, enabling further investment in our industry-leading platform and concurrent margin improvement. Additionally, our balance sheet provides solid financial flexibility as we continue to make strategic investments including the acquisition of Benfield, while streamlining our core focus with the announced sale of AIS and returning more than $400 million of excess capital to shareholders."

THIRD QUARTER FINANCIAL SUMMARY

Total revenue increased 6% to $1.8 billion with organic revenue growth of 2%. Total operating expenses increased 8% or $113 million to $1.6 billion, including a $37 million increase in restructuring expense and a $28 million unfavorable impact from foreign currency translation.

Restructuring expense was $54 million in the third quarter compared to $17 million in the prior year quarter. An analysis of restructuring-related expenses by segment and type for the 2007 restructuring program is detailed on page 12 of this release.

Restructuring savings in the third quarter related to the 2005 restructuring program are estimated at $67 million compared to $61 million in the prior year quarter. Of the estimated restructuring savings in the third quarter, $57 million were related to the Brokerage segment, primarily due to workforce reduction. The 2005 restructuring program resulted in cumulative cost savings of approximately $225 million in 2007 and is on track to achieve $270 million of cumulative cost savings in 2008.

Restructuring savings in the third quarter related to the 2007 restructuring program are estimated at $29 million compared to no material savings in the prior year quarter. Of the estimated restructuring savings in the third quarter, $23 million were related to the Brokerage segment primarily for workforce reduction. Before any potential reinvestment of savings, the 2007 restructuring program is now expected to result in cumulative cost savings of approximately $75-80 million in 2008, $220-245 million in 2009 and $300 million in 2010, primarily as a result of additional cost savings opportunities to streamline non-client facing support functions globally.

Foreign currency translation increased net income by $0.04 per share compared to the prior year quarter due primarily to fluctuations in the U.S. dollar versus the Euro and British pound.

Effective tax rate on continuing operations was 27.8% for the third quarter compared to 41.7% for the prior year quarter. The rate in the third quarter includes an underlying tax rate on operations of 29.0%. The prior year quarter reflected an underlying tax rate of 33.5% and a $22 million non- cash adjustment related to the revaluation of deferred tax assets in the Company's UK operations resulting from a reduction in the statutory rate.

Average diluted shares outstanding declined to 290 million in the third quarter compared to 322 million in the prior year quarter, due primarily to the Company's share repurchase program. During the third quarter, the Company repurchased 9.3 million shares of common stock for $426 million, at an average price of $45.90 per share. As of September 30, the Company had approximately $850 million of remaining share repurchase authorization.

Discontinued Operations after-tax loss was $36 million or ($0.12) per share compared to after-tax income of $74 million or $0.23 per share for the prior year quarter. Discontinued operations include the results of Automobile Insurance Specialists (AIS) and post-close adjustments related to the sale of Combined Insurance Companies of America (CICA) and Sterling Life Insurance (Sterling). The prior year quarter includes the results of CICA, Sterling, and AIS.

THIRD QUARTER SEGMENT REVIEW

Certain noteworthy items impacted revenue, pretax income and pretax margins in the third quarter of 2008 and 2007. The third quarter segment reviews provided below include supplemental information related to adjusted pretax income and pretax margin which is described in detail on the "Reconciliation of Non-GAAP Measures - Segments and Diluted Earnings Per Share" on page 11 of this press release.



    RISK AND INSURANCE BROKERAGE SERVICES

    (millions)    Third Quarter Ended                      Less:
                   -------------------          Less:   Acquisitions,  Organic
    Commissions,  Sep 30,  Sep 30,      %      Currency  Divestitures, Revenue
    Fees, Other    2008      2007     Change    Impact     Other       Growth
   ------------ --------- ---------  --------  --------  ------------ --------
    Americas        $557      $546       2%       1%          -%          1%
    U.K.             182       193      (6)      (2)         (3)         (1)
    EMEA             314       268      17       10           2
                       5
    Asia Pacific     120       116       3        3          (1)          1
    Reinsurance      252       232       9        4           4           1
                --------- ---------  --------  --------  ------------ --------

    Sub-Total     $1,425    $1,355       5%       3%          -%          2%
                --------- ---------  --------  --------  ------------ --------

    Investment
     Income          $48       $56     (14)%
                --------- ---------  --------
    Total
     Revenue      $1,473    $1,411       4%
                ========= =========  ========

Risk and Insurance Brokerage Services total revenue increased 4% to $1.5 billion compared to the prior year quarter including 2% organic revenue growth in commissions, fees and other and a 14% decline in investment income. Americas organic revenue increased 1% reflecting strong growth in Latin America and solid growth in Canada, partially offset by a significant decline in the Company's Cananwill premium financing business. U.K. organic revenue decreased 1% due primarily to soft market conditions. EMEA organic revenue increased 5% due to solid growth in continental Europe and strong growth in emerging markets. Asia Pacific organic revenue increased 1% reflecting solid growth in most Asian markets, primarily offset by the impact of certain regulatory changes in Japan. Reinsurance organic revenue increased 1% due primarily to growth in global facultative and treaty placements, partially offset by soft market conditions.



                                          Third Quarter Ended
                                       ------------------------
    (millions)                            Sep 30,       Sep 30,     %
                                           2008          2007     Change
                                       ----------    ---------- ----------
    Revenue                              $1,473       $ 1,411         4%
    -------
    Expenses
    --------
        Compensation and benefits           910           832          9
        Other expenses                      384           351          9
                                       ----------    ---------- ----------
      Total operating expenses            1,294         1,183          9

      Operating income                     $179          $228        (21)%
        Other (income) expense               (9)            -        N/A
                                       ----------    ---------- ----------
    Pretax income                          $188          $228        (18)%
                                       ==========    ========== ==========
    Pretax margin                          12.8%         16.2%

    Pretax income - adjusted               $247          $244          1%
    Pretax margin - adjusted               16.8%         17.3%

Compensation and benefits for the third quarter increased 9% or $78 million from the prior year quarter including a $27 million increase in restructuring costs, a $19 million unfavorable impact from foreign currency translation and investments in key talent, partially offset by benefits related to the 2005 and 2007 restructuring programs. Other expenses increased 9% or $33 million compared to the prior year quarter including a $10 million increase in restructuring costs, an $8 million unfavorable impact from foreign currency translation and $6 million for the previously disclosed reviews under the Foreign Corrupt Practices Act (FCPA) and similar laws in other countries and related compliance initiatives.

Third quarter pretax income decreased 18% to $188 million. Adjusting for certain items detailed on page 11 of this press release, pretax income increased 1% or $3 million to $247 million and pretax margin decreased 50 basis points to 16.8% versus the prior year quarter due primarily to lower investment income and a decline in Cananwill pretax income, which negatively impacted adjusted pretax margin by 80 basis points.



    CONSULTING

    (millions)   Third Quarter Ended                         Less:
                -------------------             Less:    Acquisitions, Organic
    Commissions,  Sep 30,   Sep 30,     %      Currency  Divestitures, Revenue
    Fees, Other    2008      2007     Change    Impact     Other       Growth
    ----------- --------- ---------  --------  --------  ------------ --------
    Services       $284      $269         6%       1%        (3)%        8%
    Outsourcing      51        55        (7)      (2)        (1)        (4)
                --------- ---------  --------  --------  ------------ --------
    Sub-Total      $335      $324         3%       1%        (4)%        6%
                --------- ---------  --------  --------  ------------ --------

    Investment
     Income          $2        $1       100%
                --------- ---------  --------
    Total
     Revenue       $337      $325         4%
                ========= =========  ========

    Consulting total revenue increased 4% to $337 million compared to the
prior year quarter including 6% organic revenue growth in commissions, fees
and other.  Organic revenue in Consulting Services increased 8% reflecting
growth in compensation and health and benefits consulting.  Organic revenue in
Outsourcing declined 4% due to the previously announced termination of a
significant outsourcing contract, partially offset by modest growth in
benefits outsourcing.



                                             Third Quarter Ended
                                           ------------------------
    (millions)                                Sep 30,      Sep 30,      %
                                               2008         2007      Change
                                           ----------    ---------- ----------
    Revenue                                    $337         $325         4%
    Expenses
        Compensation and benefits               206          209        (1)
        Other expenses                           79           78         1
                                           ----------    ---------- ----------
      Total operating expenses                  285          287        (1)


      Operating income                          $52          $38        37%
        Other (income) expense                    -            -          -
                                           ----------    ---------- ----------
    Pretax income                               $52          $38        37%
                                           ==========    ========== ==========

    Pretax margin                              15.4%        11.7%

    Pretax income - adjusted                    $53          $39        36%
    Pretax margin - adjusted                   15.7%        12.0%


Total operating expenses for the third quarter decreased 1% or $2 million from the prior year quarter due primarily to benefits related to the 2007 restructuring program.

Third quarter pretax income increased 37% to $52 million and the pretax margin increased 370 basis points to 15.4% versus the prior year quarter. Adjusting for certain items detailed on page 11, pretax income increased 36% to $53 million and the pretax margin increased 370 basis points to 15.7%.



    UNALLOCATED INCOME AND EXPENSE

                                                Third Quarter Ended
                                                -------------------
    (millions)                                    Sep 30,   Sep 30,      %
                                                   2008      2007     Change
                                                --------- --------- ---------
    Operating segment income before tax            $240      $266       (10)%
    Property & Casualty operations                   (2)       (5)      (60)
    Unallocated investment income                    40        19       111
    Unallocated expenses                            (34)      (24)       42
    Interest expense                                (32)      (33)       (3)
                                                --------- --------- ---------
    Income from continuing
      operations before tax                        $212      $223        (5)%
                                                ========= ========= =========

Property & Casualty loss declined $3 million compared to the prior year quarter. All property & casualty business was placed into run-off in the fourth quarter 2006.

Unallocated investment income for the third quarter increased $21 million to $40 million compared to the prior year quarter due primarily to a $13 million increase in certain private equity distributions and an increase in interest income from higher cash balances. Unallocated expenses increased $10 million to $34 million versus the prior year quarter due primarily to $6 million in Benfield costs and $3 million of absorbed costs previously allocated to the insurance underwriting segment. Interest expense was relatively unchanged from the prior year quarter.

Conference Call and Webcast Details

The Company will host a conference call on Friday, October 31, 2008 at 7:30 a.m. central time. Interested parties can listen to the conference call via a live audio webcast at http://www.aon.com.

About Aon

Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting. Through its 36,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was named the world's best broker by Euromoney magazine's 2008 Insurance Survey. In 2008, Aon was ranked as the world's largest insurance broker by Business Insurance. Aon also was ranked by A.M. Best as the number one global insurance brokerage in 2007 and 2008 based on brokerage revenues, and voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com.

Safe Harbor Statement

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future 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: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, the outcome of inquiries from regulators and investigations related to compliance with the U.S. Foreign Corrupt Practices Act and non-U.S. anti-corruption laws, the impact of investigations brought by U.S. state attorneys general, U.S. state insurance regulators, U.S. federal prosecutors, U.S. federal regulators, and regulatory authorities in the U.K. and other countries, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, our ability to complete our pending acquisition of Benfield Group Limited and, if completed, to integrate Benfield successfully and to realize the anticipated benefits of the Benfield acquisition. 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 and several additional measures including expenses, margins and income per share, that exclude the effects of restructuring charges and certain other noteworthy items that affected results for the comparable periods. Organic revenue growth excludes from reported revenues the impact of foreign exchange, acquisitions, divestitures, transfers between business units, investment income, reimbursable expenses and unusual items. Reconciliation is provided in the attached schedules. Supplemental organic revenue growth information and additional measures that exclude the effects of the restructuring charges and certain other items do not affect net income or any other GAAP reported amounts. Management believes that these measures are important to make meaningful period-to-period comparisons and that this supplemental information is helpful to investors. They should be viewed in addition to, not in lieu of, the Company's Consolidated Summary of Operations. Industry peers provide similar supplemental information regarding their performance, although they may not make identical adjustments.


     Investor Contact:
     Scott Malchow
     Vice President, Investor Relations
     312-381-3983

     Media Contact:
     David Prosperi
     Vice President, Global Public Relations
     312-381-2485



    Aon Corporation
    Consolidated Summary of Operations (Unaudited)



                        Third Quarter Ended           Nine Months Ended
    (millions      ----------------------------- -----------------------------
     except        Sept. 30, Sept. 30,  Percent  Sept. 30, Sept. 30,  Percent
     per share       2008      2007     Change     2008      2007     Change
     data)         --------- --------- --------- --------- --------- ---------

    Revenue
    -------
      Commissions,
       fees and
       other        $1,756    $1,672         5%   $5,493    $5,125         7%
      Investment
       income           91        77        18       218       236        (8)
                   --------- --------- --------- --------- --------- ---------
        Total
         revenue     1,847     1,749         6     5,711     5,361         7
                   --------- --------- --------- --------- --------- ---------

    Expenses
    --------
      Compensation
       and
       benefits      1,132     1,048         8     3,432     3,188         8
      Other
       general
       expenses        425       397         7     1,350     1,228        10
      Depreciation
       and
       amortization     49        48         2       157       141        11
                   --------- --------- --------- --------- --------- ---------
        Total
         operating
         expenses    1,606     1,493         8     4,939     4,557         8
                   --------- --------- --------- --------- --------- ---------

    Operating income   241       256        (6)      772       804        (4)
      Interest
       expense          32        33        (3)       96       102        (6)
      Other income      (3)        -       N/A        (9)      (29)      (69)
                   --------- --------- --------- --------- --------- ---------

    Income from
     continuing
     operations
     before
     provision
     for income tax    212       223        (5)      685       731        (6)
      Provision for
       income
       tax (1)          59        93       (37)      191       262       (27)
                   --------- --------- --------- --------- --------- ---------


    Income from
     continuing
     operations        153       130        18       494       469         5

    Discontinued
     operations
      Income (loss)
       from
       discontinued
       operations      (55)       88       N/A     1,445       261       454
      Provision
       for
       (benefit
        from)
        income
        tax (2)        (19)       14       N/A       471        73       545
                   --------- --------- --------- --------- --------- ---------

    Income (loss)
     from
     discontinued
     operations        (36)       74       N/A       974       188       418
                   --------- --------- --------- --------- --------- ---------

    Net income        $117      $204       (43)%  $1,468      $657       123%
                   ========= ========= ========= ========= ========= =========

    Basic net
     income
     (loss) per
     share:
      Continuing
       operations    $0.56     $0.44        27%    $1.70     $1.59         7%
      Discontinued
       operations    (0.13)     0.25       N/A      3.37      0.63       435
                   --------- --------- --------- --------- --------- ---------
      Net income     $0.43     $0.69       (38)%   $5.07     $2.22       128%
                   ========= ========= ========= ========= ========= =========

    Diluted net
     income
     (loss) per
     share:
      Continuing
       operations    $0.52     $0.41        27%    $1.62     $1.47        10%
      Discontinued
       operations    (0.12)     0.23       N/A      3.19      0.58       450
                   --------- --------- --------- --------- --------- ---------
      Net income     $0.40     $0.64       (38)%   $4.81     $2.05       135%
                   ========= ========= ========= ========= ========= =========

    Weighted average
     common shares
     outstanding -
     diluted         290.3     321.5       (10)%   305.2     322.6        (5)%
                   ========= ========= ========= ========= ========= =========



    (1) Tax rate from continuing operations is 27.8% and 41.7% for the third
        quarters ended September 30, 2008 and 2007,  respectively, and 27.9%
        and 35.8% for the nine months ended September 30, 2008 and 2007,
        respectively.

    (2) Tax rate from discontinued operations is 34.5% and 15.9% for the third
        quarters ended September 30, 2008 and 2007, respectively, and 32.6%
        and 28.0% for the nine months ended September 30, 2008 and 2007,
        respectively.



    Aon Corporation
    Revenue from Continuing Operations (Unaudited)

                                          Third Quarter Ended
                      --------------------------------------------------------
                                                             Less:
                                                          Acquisitions,
                         Sept.    Sept.            Less:  Divestitures Organic
                          30,      30,   Percent Currency      &      Revenue
    (millions)           2008     2007    Change  Impact     Other   Growth(1)
                       -------- -------- -------- -------- --------- ---------
    Commissions,
     Fees and Other
    ----------------
    Risk and
     Insurance
     Brokerage
     Services:
      Americas           $557     $546      2%        1%       -%       1%
      United Kingdom      182      193     (6)       (2)      (3)      (1)
      Europe, Middle
       East & Africa      314      268     17        10        2        5
      Asia Pacific        120      116      3         3       (1)       1
      Reinsurance
       brokerage
       and related
       services           252      232      9         4        4        1
                       -------- -------- -------- -------- --------- ---------
        Total Risk and
         Insurance
         Brokerage
         Services       1,425    1,355      5         3        -        2
                       -------- -------- -------- -------- --------- ---------

    Consulting:
      Consulting
       services           284      269      6         1       (3)       8
      Outsourcing          51       55     (7)       (2)      (1)      (4)
                       -------- -------- -------- -------- --------- ---------

        Total
         Consulting       335      324      3         1       (4)       6
                       -------- -------- -------- -------- --------- ---------

        Total
         Operating
         Segments      $1,760   $1,679      5%        3%       -%       2%
                       ======== ======== ======== ======== ========= =========

    Investment Income
    -----------------
    Risk and Insurance
     Brokerage
     Services             $48      $56    (14)%
    Consulting              2        1    100
                       -------- -------- --------
       Total
        Operating
        Segments          $50      $57    (12)%
                       ======== ======== ========

    Total Revenue
    -------------
    Risk and Insurance
     Brokerage
     Services          $1,473   $1,411      4%
    Consulting            337      325      4
    Unallocated            41       21     95
    Intersegment           (4)      (8)   (50)
                       -------- -------- --------
      Total            $1,847   $1,749     6%
                       ======== ======== ========

    (1) Organic revenue growth excludes the impact of foreign exchange,
        acquisitions, divestitures, transfers, reimbursable expenses and
        unusual items.



    Aon Corporation
    Revenue from Continuing Operations (Unaudited)

                                           Nine Months Ended
                      --------------------------------------------------------
                                                             Less:
                                                          Acquisitions,
                         Sept.    Sept.            Less:  Divestitures Organic
                          30,      30,   Percent Currency      &      Revenue
    (millions)           2008     2007    Change  Impact     Other   Growth(1)
                       -------- -------- -------- -------- --------- ---------
    Commissions, Fees
     and Other
    -----------------
    Risk and
     Insurance
     Brokerage
     Services:
      Americas         $1,638   $1,609      2%       2%        -%        -%
      United Kingdom      546      545      -        1        (1)        -
      Europe,
       Middle East &
       Africa           1,188      988     20       13         2         5
      Asia Pacific        373      343      9        8        (1)        2
      Reinsurance
       brokerage
       and related
       services           756      691      9        5         3         1
                       -------- -------- -------- -------- --------- ---------

        Total Risk
         and Insurance
         Brokerage
         Services       4,501    4,176      8        5         1         2
                       -------- -------- -------- -------- --------- ---------


    Consulting:
      Consulting
       services           850      794      7        3        (1)        5

      Outsourcing         162      177     (8)       1        (1)       (8)
                       -------- -------- -------- -------- --------- ---------
        Total
         Consulting     1,012      971      4        3        (2)        3
                       -------- -------- -------- -------- --------- ---------

        Total
         Operating
         Segments      $5,513   $5,147      7%       5%        -%        2%
                       ======== ======== ======== ======== ========= =========


    Investment Income
    -----------------
    Risk and Insurance
     Brokerage Services  $148     $154     (4)%
    Consulting              4        8    (50)
                       -------- -------- --------
        Total
         Operating
         Segments        $152     $162     (6)%
                       ======== ======== ========
    Total Revenue
    -------------
    Risk and
     Insurance
     Brokerage
     Services          $4,649   $4,330      7%
    Consulting          1,016      979      4
    Unallocated            66       76    (13)
    Intersegment          (20)     (24)   (17)
                       -------- -------- --------
        Total          $5,711   $5,361      7%
                       ======== ======== ========

    (1) Organic revenue growth excludes the impact of foreign exchange,
        acquisitions, divestitures, transfers, reimbursable expenses and
        unusual items.



    Aon Corporation - Segments (Unaudited)
    Risk and Insurance Brokerage Services- Continuing Operations
    ------------------------------------------------------------
                              Third Quarter Ended         Nine Months Ended
                         --------------------------  -------------------------
                       Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
    (millions)            2008    2007     Change     2008     2007     Change
                        -------  -------  -------   -------  -------   -------
    Revenue
    -------
      Commissions,
       fees and other   $1,425   $1,355        5%   $4,501   $4,176        8%
      Investment income     48       56      (14)      148      154       (4)
                        -------  -------  -------   -------  -------   -------
        Total revenue    1,473    1,411        4     4,649    4,330        7
                        -------  -------  -------   -------  -------   -------

    Expenses
    --------
      Compensation
       and benefits        910      832        9     2,773    2,534        9
      Other general
       expenses            384      351        9     1,233    1,091       13
                        -------  -------  -------   -------  -------   -------
        Total
         operating
         expenses        1,294    1,183        9     4,006    3,625       11
                        -------  -------  -------   -------  -------   -------

    Operating income       179      228      (21)      643      705       (9)
      Other income          (9)       -      N/A       (14)     (29)     (52)
                        -------  -------  -------   -------  -------   -------
    Income before
     provision for
     income tax           $188     $228      (18)%    $657     $734      (10)%
                        =======  =======  =======   =======  =======   =======

    Pretax income
     margin              12.8%    16.2%              14.1%    17.0%



    Consulting - Continuing Operations
    ----------------------------------
                              Third Quarter Ended         Nine Months Ended
                         --------------------------  -------------------------
                       Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
    (millions)            2008    2007     Change     2008     2007     Change
                        -------  -------  -------   -------  -------   -------

    Revenue
    -------
      Commissions,
       fees and other     $335     $324        3%   $1,012     $971         4%
      Investment income      2        1      100         4        8       (50)
                        -------  -------  -------   -------  -------   -------
        Total revenue      337      325        4     1,016      979         4
                        -------  -------  -------   -------  -------   -------

    Expenses
    --------
      Compensation
       and benefits        206      209       (1)      612      604         1
      Other general
       expenses             79       78        1       247      246         -
                        -------  -------  -------   -------  -------   -------
        Total operating
         expenses          285      287       (1)      859      850         1
                        -------  -------  -------   -------  -------   -------

    Operating income        52       38       37       157      129        22
      Other income           -        -      N/A        (1)       -       N/A
                        -------  -------  -------   -------  -------   -------

    Income before
     provision for
     income tax            $52      $38       37%     $158     $129        22%
                        =======  =======  =======   =======  =======   =======

    Pretax
     income
     margin               15.4%     11.7%             15.6%    13.2%

    Reconciliation of
     segment income
     before provision
     for income tax to
     income from
     continuing
     operations
     before provision
     for income tax:
                           Third Quarter Ended         Nine Months Ended
                       --------------------------  -------------------------
                       Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
    (millions)           2008      2007    Change    2008      2007    Change
                       -------  -------  -------   -------  -------   -------
    Segment income
     before provision
     for income tax
      Risk and
       Insurance
       Brokerage
       Services          $188     $228      (18)%     $657    $734       (10)%

      Consulting           52       38       37        158     129        22
                       -------  -------  -------   -------  -------   -------
        Total segment
         income before
          provision for
          income tax      240      266      (10)       815     863        (6)
      Property &
       Casualty
       operations          (2)      (5)     (60)        (5)     (9)      (44)
      Unallocated
       investment
       income              40       19      111         62      70       (11)
      Unallocated
       expenses           (34)     (24)      42        (91)    (91)        -
      Interest expense    (32)     (33)      (3)       (96)   (102)       (6)
                       -------  -------  -------   -------  -------   -------

    Income from continuing
     operations before
     provision for
     income tax          $212     $223       (5)%     $685    $731        (6)%
                       =======  =======  =======   =======  =======   =======

    Pretax
     income
     margin              11.5%    12.8%               12.0%   13.6%



    Aon Corporation
    Reconciliation of the Impact of Non-GAAP Measures on Segments and Diluted
    Earnings Per Share (Unaudited) (1)


                    Third Quarter Ended               Nine Months Ended
                    September 30, 2008                September 30, 2008
    (millions-------------------------------   -------------------------------
     except  Risk and          Unallo-         Risk and          Unallo-
     per     Insurance         cated           Insurance         cated
     share   Brokerage  Cons-  Income &        Brokerage  Cons-  Income &
     data)   Services  ulting  Expense  Total  Services  ulting  Expense Total
    Revenue  --------- ------- ------- ------  --------- ------- ------- -----
     as
     reported $1,473    $337    $37   $1,847   $4,649   $1,016    $46  $5,711
             ========= ======= ======= ======  ========= ======= ======= =====
    Income
     (loss)
     from
     continuing
     operations
     before
     provision
     for income
     tax - as
     reported   $188     $52   $(28)   $212      $657     $158  $(130)   $685
      Restruc-
       turing
       charges
       (2005
       and
       2007
       plans)     53       1      -      54       159        8      -     167
      Anti-bribery
       and
       compliance
       initiatives 6       -      -       6        31        -      -      31
      Benfield
       costs       -       -      6       6         -        -      6       6
      Gain on
       sale
       of
       land        -       -      -       -        (5)       -      -      (5)
             --------- ------- ------- ------  --------- ------- ------- -----
    Income (loss)
     from
     continuing
     operations
     before
     provision
     for income
     tax - as
     adjusted   $247     $53   $(22)    278      $842     $166  $(124)    884
             ========= ======= =======         ========= ======= =======

    Provision
     for
     income
     taxes (2)                           78                               247
                                       ------                            -----
    Income from
     continuing
     operations -
     as
     adjusted                          $200                              $637
                                       ======                            =====

    Diluted
     earnings
     per share
     from
     continuing
     operations -
     as
     adjusted                         $0.69                             $2.09
                                      =====                             =====


    Weighted
     average
     common
     shares
     out-
     standing -
     diluted                          290.3                             305.2
                                      =====                             =====


    Pretax
     income
     margins -
     as
     adjusted   16.8%   15.7%    N/A   15.1%     18.1%    16.3%   N/A    15.5%
             ========= ======= ======= ======  ========= ======= ======= =====


                    Third Quarter Ended               Nine Months Ended
                    September 30, 2007                September 30, 2007
    (millions-------------------------------   -------------------------------
     except  Risk and          Unallo-         Risk and          Unallo-
     per     Insurance         cated           Insurance         cated
     share   Brokerage  Cons-  Income &        Brokerage  Cons-  Income &
     data)   Services  ulting  Expense  Total  Services  ulting  Expense Total
    Revenue  --------- ------- ------- ------  --------- ------- ------- -----
     as
     reported $1,411    $325    $13  $1,749    $4,330     $979     $52 $5,361
             ========= ======= ======= ======  ========= ======= ======= =====

    Income
     (loss)
     from
     continuing
     operations
     before
     provision
     for income
     tax - as
     reported   $228     $38   $(43)   $223      $734     $129   $(132)  $731

    Restruc-
     turing
     charges
     (2005
     and
     2007
     plans)       16       1      -      17        44        7       -     51
    Gain on
     sale of
     businesses    -       -      -       -       (30)       -       -    (30)
    Reinsurance
     litigation    -       -      -       -        21        -       -     21
                ------- ------- ------- ------  --------   ------ ------ -----
    Income (loss)
     from
     continuing
     operations
     before
     provision
     for income
     tax - as
     adjusted   $244     $39   $(43)    240      $769     $136   $(132)   773
            ========= ======= =======         ========= ======= =======

    Provision
     for
     income
     taxes (2)                           76                               250
                                      ------                            -----
    Income
     from
     continuing
     operations -
     as
     adjusted                          $164                              $523
                                      ======                            =====
    Diluted
     earnings
     per share
     from
     continuing
     operations -
     as
     adjusted                         $0.52                             $1.64
                                      ======                            =====

    Weighted
     average
     common
     shares
     out-
     standing -
     diluted                          321.5                             322.6
                                      ======                            =====

    Pretax
     income
     margins -
     as
     adjusted   17.3%   12.0%    N/A   13.7%     17.8%    13.9%   N/A   14.4%
            ========= ======= ======= ======  ========= ======= ======= =====


    (1) Certain noteworthy items impacting revenue and pretax income in 2008
        and 2007 are described in this schedule.  The revenue, income (loss)
        from continuing operations before provision for income tax, diluted
        earnings  per share from continuing operations and related margins
        shown with the caption "as adjusted" are non-GAAP measures.

    (2) Tax rate from continuing operations is 28.1% and 31.7% for the third
        quarters ended September 30, 2008 and 2007, respectively, and 27.9%
        and 32.3% for the nine months ended September 30, 2008 and 2007,
        respectively.


    Aon Corporation
    2007 Restructuring Plan (Unaudited)


    By Type:                            Actual                       Estimated
                        -------------------------------------------  ---------
                                 Six    Third      Nine     Total
                                 Months Quarter    Months   Incurred
    (millions)          2007     2008   2008       2008     to Date    Total
                        -------------------------------------------  ---------

    Workforce reduction
     (Compensation and
     benefits)           $17      $76    $42        $118      $135       $284
    Lease consolidation
     (Other general
     expenses)            22       18      7          25        47         88
    Asset impairments
     (Depreciation
     and amortization)     4       14     (1)         13        17         44
    Other costs associated
     with restructuring
     (Other general
     expenses)             3        5      4           9        12         34
                        -------------------------------------------  ---------
    Total restructuring
     and related
     expenses            $46     $113    $52        $165      $211       $450
                        ===========================================  =========


    By Segment:                         Actual                       Estimated
                        -------------------------------------------  ---------
                                 Six    Third      Nine     Total
                                Months Quarter    Months   Incurred
    (millions)          2007     2008   2008       2008     to Date    Total
                        -------------------------------------------  ---------

    Risk and Insurance
     Brokerage Services $41     $106    $51        $157      $198       $403
    Consulting            5        7      1           8        13         47
                        -------------------------------------------  ---------
    Total restructuring
     and related
     expenses           $46     $113    $52        $165      $211       $450
                        ===========================================  =========



    Aon Corporation
    Consolidated Summary of Operations - Reclassified for Discontinued
    Operations (Unaudited)

                        2007                                2008
                --------------------------------  ----------------------------
    (millions
     except
     per
     share      1st     2nd    3rd    4th          1st    2nd    3rd
     data)      Quar-   Quar-  Quar-  Quar- Full   Quar-  Quar-  Quar-  Nine
                ter     ter    ter    ter   Year   ter    ter    ter    Months
               ------  ------ ------ ------ ------ ------ ------ ------ ------


    Revenue
    -------
     Commi-
      ssions,
      fees and
      other   $1,702  $1,751 $1,672 $1,944 $7,069 $1,848 $1,889 $1,756 $5,493
     Inve-
      stment
      income      69      90     77     64    300     59     68     91    218
               ------  ------ ------ ------ ------ ------ ------ ------ ------
       Total
        rev-
        enue   1,771   1,841  1,749  2,008  7,369  1,907  1,957  1,847  5,711
               ------  ------ ------ ------ ------ ------ ------ ------ ------

    Expenses
    --------
     Compen-
      sation
      and
      benefits 1,042   1,098  1,048  1,159  4,347  1,155  1,145  1,132  3,432
     Other
      general
      expenses   414     417    397    499  1,727    422    503    425  1,350
     Depre-
      ciation
      and
      amort-
      ization     47      46     48     52    193     50     58     49    157
               ------  ------ ------ ------ ------ ------ ------ ------ ------
       Total
        oper-
        ating
        expe-
        nses   1,503   1,561  1,493  1,710  6,267  1,627  1,706  1,606  4,939
               ------  ------ ------ ------ ------ ------ ------ ------ ------
    Operating
     income      268     280    256    298  1,102    280    251    241    772

     Interest
      expense     35      34     33     36    138     33     31     32     96
     Other
      income       -     (29)     -     (6)   (35)    (4)    (2)    (3)    (9)
               ------  ------ ------ ------ ------ ------ ------ ------ ------
    Income
     from
     cont-
     inuing
     operations
     before
     provision
     for income
     tax         233     275    223    268    999    251    222    212    685
      Provision
       for
       income
       tax        73      96     93     82    344     75     57     59    191
               ------  ------ ------ ------ ------ ------ ------ ------ ------
    Income
     from
     conti-
     nuing
     opera-
     tions       160     179    130    186    655    176    165    153    494

    Disc-
     ontinued
     opera-
     tions
      Income
       (loss)
       from
       discont-
       inued
       opera-
       tions      80      93     88     80    341     68  1,432    (55) 1,445
      Provision
       for
       (benefit
       from)
       income
       tax        27      32     14     59    132     26    464    (19)   471
               ------  ------ ------ ------ ------ ------ ------ ------ ------
    Income
     (loss)
     from
     discon-
     tinued
     opera-
     tions        53      61     74     21    209     42    968    (36)   974
               ------  ------ ------ ------ ------ ------ ------ ------ ------

    Net
     income     $213    $240   $204   $207   $864   $218 $1,133   $117 $1,468
              ======  ====== ====== ====== ====== ====== ====== ====== ======

    Basic net
     income (loss)
     per
     share:
      Conti-
      nuing
      opera-
      tions    $0.53   $0.60  $0.44  $0.62  $2.20  $0.58  $0.57  $0.56  $1.70
      Discon-
      tinued
      opera-
      tions     0.18    0.21   0.25   0.07   0.70   0.14   3.34  (0.13)  3.37
               ------  ------ ------ ------ ------ ------ ------ ------ ------
      Net
       income  $0.71   $0.81  $0.69  $0.69  $2.90  $0.72  $3.91  $0.43  $5.07
               ======  ====== ====== ====== ====== ====== ====== ====== ======

    Dilutive
     net income
     (loss)
     per share:
      Conti-
      nuing
      opera-
      tions    $0.50   $0.56  $0.41  $0.58  $2.04  $0.55  $0.54  $0.52  $1.62
      Discon-
      tinued
      opera-
      tions     0.16    0.19   0.23   0.06   0.65   0.13   3.17  (0.12)  3.19
               ------  ------ ------ ------ ------ ------ ------ ------ ------
      Net
       income  $0.66   $0.75  $0.64  $0.64  $2.69  $0.68  $3.71  $0.40  $4.81
               ======  ====== ====== ====== ====== ====== ====== ====== ======

    Weighted
     average
     common
     shares
     outstanding
     - diluted  324.4   321.9  321.5  324.1  323.0  319.8  305.3  290.3  305.2
               ======  ====== ====== ====== ====== ====== ====== ====== ======




    Aon Corporation
    Segments- Reclassification for Discontinued Operations (Unaudited)


                                     2007                       2008
               --------------------------------------  -----------------------
                 1st      2nd      3rd     4th   Full    1st      2nd    Six
    (millions) Quarter  Quarter  Quarter Quarter Year  Quarter Quarter  Months
               -------  -------  ------- ------- ----  ------- -------  ------
    Revenue
    -------
    Risk and
     insurance
     brokerage
     services
      As re-
       ported  $1,456   $1,515    $1,437 $1,651 $6,059  $1,591  $1,633  3,224
      Less:
       reclassifi-
       cation to
       discon-
       tinued
       opera-
       tions      (27)     (25)      (26)   (24)  (102)    (25)    (23)   (48)
               -------  -------  ------- ------- ----- ------- -------  ------
        As re-
         class-
         ified  1,429    1,490     1,411  1,627  5,957   1,566   1,610  3,176

    Consulting    329      325       325    373  1,352     343     336    679

    Unallocated    23       32        21     13     89       7      18     25

    Interseg-
     ment         (10)      (6)       (8)    (5)   (29)     (9)     (7)   (16)
               -------  -------  ------- ------- ----- ------- ------- ------
    Total      $1,771   $1,841    $1,749 $2,008 $7,369  $1,907  $1,957 $3,864
               =======  =======  ======= ======= ===== ======= ======= ======

    Income (loss)
     before income
     tax
    --------------

    Risk and
     insurance
     brokerage
     services
      As re-
       ported    $242     $278     $236    $281 $1,037    $244     $235  $479
      Less:
       reclass-
       ification
       to discon-
       tinued
       opera-
       tions       (8)      (6)      (8)     (5)   (27)     (6)      (4)  (10)
               -------  -------  ------- ------- ----- ------- -------- ------
        As re-
         class-
         ified    234      272      228     276  1,010     238      231   469

    Consulting     47       44       38      60    189      63       43   106

    Unallocated
      As re-
       ported     (49)     (41)     (44)    (68)  (202)    (51)     (52) (103)
      Less:
       reclass-
       ification
       to discon-
       tinued
       opera-
       tions        1        -        1       -      2       1        -     1
               -------  -------  ------- ------- ----- ------- -------- ------
        As re-
         class-
         ified    (48)     (41)     (43)    (68)  (200)    (50)     (52) (102)
               -------  -------  ------- ------- ----- ------- -------- ------
    Total        $233     $275     $223    $268   $999    $251     $222  $473
               =======  =======  ======= ======= ===== ======= ======== ======

    Income from
     continuing
     operations
     before income
     tax - margins
     -------------
    Risk and
     insurance
     brokerage
     services
      As re-
       ported    16.6%    18.3%    16.4%   17.0%  17.1%  15.3%     14.4% 14.9%
      As re-
       class-
       ified     16.4%    18.3%    16.2%   17.0%  17.0%  15.2%     14.3% 14.8%

    Consulting   14.3%    13.5%    11.7%   16.1%  14.0%  18.4%     12.8% 15.6%

    Total
      As re-
       ported    13.3%    15.1%    13.0%   13.4%  13.7%  13.3%     11.4% 12.3%
      As re-
       class-
       ified     13.2%    14.9%    12.8%   13.3%  13.6%  13.2%     11.3% 12.2%




    Aon Corporation
    Auto Insurance Specialists (Unaudited)

    (mill-
    ions                   2007                            2008
    except ------------------------------------ -----------------------------
    per     1st     2nd     3rd     4th   Full   1st     2nd     3rd    Nine
    share  Quarter Quarter Quarter Quarter Year Quarter Quarter Quarter Months
    data)  ------- ---------------------------- -----------------------------
    Revenue
    -------
      Commi-
       ssions,
       fees
       and
       other $27     $25     $26    $23   $101    $25     $23      $23    $71
      Inves-
       tment
       income  -       -       -      1      1      -       -        -     -
           ------- ------- ------- ------- ---- ------- ------- ------- ------
        Total
        rev-
        enue  27      25      26     24    102     25      23       23     71
           ------- ------- ------- ------- ---- ------- ------- ------- ------
    Expenses
      Compen-
       sation
       and
       bene-
       fits   11      11      10      9     41     11      10       11     32
      Other
       general
       expe-
       nses    9       8       9      9     35      9       9       34     52
      Deprecia-
       tion
       and
       amor-
       tiza-
       tion    -       -       -      1      1      -       -        -      -
           ------- ------- ------- ------- ---- ------- ------- ------- ------
        Total
         oper-
         ating
         expen-
         ses  20      19      19     19     77     20      19       45     84
           ------- ------- ------- ------- ---- ------- ------- ------- ------
    Operating
     income
     (loss)    7       6       7      5     25      5       4      (22)   (13)

      Interest
       expense -       -       -      -      -      -       -        -      -
      Other
       income  -       -       -      -      -      -       -        -      -
           ------- ------- ------- ------- ---- ------- ------- ------- ------
    Income (loss)
     before
     provision
     for
     (benefit
     from)
     income
     tax       7      6        7       5    25      5       4      (22)   (13)
    Provision
     for
     (benefit
     from)
     income
     tax       2      2        3       1     8      2       1       (8)    (5)
           ------- ------- ------- ------- ---- ------- ------- ------- ------
    Net
     income
     (loss)   $5     $4       $4      $4   $17     $3      $3     $(14)   $(8)
           ======= ======= ======= ======= ==== ======= ======= ======= ======

    Basic net
     income
     (loss)
     per
     share $0.02   $0.02   $0.01   $0.01  $0.05 $0.01   $0.01   $(0.05)$(0.03)
           ======= ======= ======= ======= ==== ======= ======= ====== ======
    Dilutive
     net
     income
     (loss)
     per
     share $0.01   $0.01   $0.01   $0.01  $0.06 $0.01   $0.01   $(0.05) (0.03)
           ======= ======= ======= ====== ===== ======= ======= ======= ======
    Weighted
     average
     common
     shares
     out-
     standing -
     dil-
     uted  324.4   321.9    321.5   324.1  323.0  319.8  305.3    290.3  305.2
           ======= ======= ======= ======= ==== ======= ======= ======= ======


    Aon Corporation
    Condensed Consolidated Statements of Financial Position

                                                               As of
                                                     -------------------------
    (millions)                                       Sept. 30,       Dec. 31,
                                                        2008          2007 (2)
    -----------------------------------------------  -----------    ----------
                                                    (Unaudited)
    ASSETS
    ------
    CURRENT ASSETS
    Cash                                                $478           $584

    Short-term investments                             1,946          1,209

    Receivables                                        1,877          1,996

    Fiduciary assets (1)                               9,109          9,498

    Other current assets                                 245            219

    Assets held for sale                                  31          4,418
                                                     -----------    ----------

      Total Current Assets                            13,686         17,924

    Goodwill                                           4,882          4,915

    Other intangible assets                              222            204

    Fixed assets, net                                    449            497

    Long-term investments                                370            417

    Other non-current assets                           1,109            920
                                                    -----------    -----------

    TOTAL ASSETS                                     $20,718        $24,877
                                                    ===========    ===========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    ------------------------------------
    CURRENT LIABILITIES
    Fiduciary liabilities                             $9,109         $9,498

    Short-term debt                                        -            252

    Accounts payable and accrued liabilities           1,180          1,416

    Other current liabilities                            346            288

    Liabilities held for sale                              3          3,028
                                                     -----------    ----------

      Total Current Liabilities                       10,638         14,482

    Long-term debt                                     1,964          1,893

    Pension, post employment and post retirement
     liabilities                                       1,136          1,251

    Other non-current liabilities                      1,033          1,030
                                                     -----------    ----------

    TOTAL LIABILITIES                                 14,771         18,656


    TOTAL STOCKHOLDERS' EQUITY                         5,947          6,221
                                                    -----------    -----------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $20,718        $24,877
                                                    ===========    ===========


    (1) Includes short-term investments: 2008 - $3,092; 2007 - $3,122.
    (2) Certain amounts have been reclassified to conform to the 2008
        presentation.

 

SOURCE
Aon Corporation

CONTACT:
Investors, Scott Malchow, Vice President, Investor Relations, +1-312-381-3983, or Media, David Prosperi, Vice President, Global Public Relations, +1-312-381-2485, both of Aon Corporation

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