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Aon Reports Second Quarter 2008 Results
Total Revenue grew 6% to $2.0 billion with Organic Revenue growth of 2%
EPS from Continuing Operations was $0.55
Chicago
NYSE: AOC

 

 

     Second Quarter Highlights

     - EPS from continuing operations, excluding certain items, increased 25%
       to $0.71

     - Risk and Insurance Brokerage Services revenue grew 8% with organic
       growth of 2%

     - Risk and Insurance Brokerage Services pretax margin was 14.4% and the
       adjusted pretax margin, excluding certain items, increased 30 basis
       points to 18.1%

     - Repurchased $1.1 billion or 24.5 million shares of common stock

     - Completed sales of Combined Insurance Company of America (CICA) and
       Sterling Life Insurance (Sterling), generating $2.7 billion of
       after-tax proceeds and a $1.4 billion pretax gain

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

Net income increased 372% to $1.1 billion or $3.71 per share, compared to $240 million or $0.75 per share for the prior year quarter, including a $1.0 billion after-tax gain on the sales of CICA and Sterling. Net income from continuing operations decreased 8% to $168 million or $0.55 per share, compared to $183 million or $0.57 per share for the prior year quarter. Net income from continuing operations per share, excluding certain items, increased 25% to $0.71 compared to $0.57 for the prior year quarter. Certain items that impacted second 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.

"Our second quarter results reflect a 25 percent increase in adjusted earnings per share from continuing operations, highlighted by two percent organic revenue growth and a 30 basis point increase in adjusted pretax margin from our Brokerage segment, despite unusually high legacy litigation accruals," said Greg Case, president and chief executive officer, Aon Corporation. "Our core assets are now strategically aligned as we completed the sales of our remaining insurance underwriting businesses. Our 2007 restructuring program is on-track and beginning to deliver benefits, driving margin improvement, while funding investments to generate future revenue growth. We returned more than one billion dollars to our shareholders through the share repurchase program, demonstrating a continued belief in the underlying strength of Aon, and an effective use of capital to create long-term value for our shareholders."

SECOND QUARTER FINANCIAL SUMMARY

Total revenue increased 6% to $2.0 billion with organic revenue growth of 2%. Total operating expenses increased 9% or $145 million to $1.7 billion, including a $77 million unfavorable impact from foreign currency translation, $28 million increase in restructuring expense and $20 million of legacy litigation accruals.

Restructuring expense was $53 million in the second quarter compared to $25 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 second quarter related to the 2005 restructuring program are estimated at $67 million compared to $56 million in the prior year quarter. Of the estimated restructuring savings in the second quarter, $57 million were related to the Brokerage segment, primarily for 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 second quarter related to the 2007 restructuring program are estimated at $16 million compared to no material savings in the prior year quarter. These savings were all related to the Brokerage segment, primarily for workforce reduction. Before any potential reinvestment of savings, the 2007 restructuring program is expected to result in cumulative cost savings of approximately $50-70 million in 2008, $175-200 million in 2009 and $240 million in 2010, consistent with previous estimates.

Foreign currency translation increased net income by approximately $0.06 per share compared to the prior year quarter due primarily to a weaker U.S. dollar versus the Euro.

Effective tax rate on continuing operations was 25.7% for the second quarter compared to 34.9% for the prior year quarter. The rate in the second quarter includes an underlying tax rate on operations of 30.0% and the favorable resolution of prior year tax issues in the U.K.

Average diluted shares outstanding declined to 305 million in the second quarter compared to 322 million in the prior year quarter, due primarily to the Company's share repurchase program. During the second quarter, the Company repurchased 24.5 million shares of common stock for $1.1 billion, at an average price of $45.82 per share. As of June 30, the Company had approximately $1.3 billion of remaining share repurchase authorization.

Discontinued Operations after-tax income was $1.0 billion or $3.16 per share compared to $57 million or $0.18 per share for the prior year quarter. Discontinued operations for the second quarter included a $1.0 billion after-tax gain, subject to post-closing adjustments, related to the completed sales of both CICA and Sterling Life Insurance on April 1.

SECOND QUARTER SEGMENT REVIEW

Certain noteworthy items impacted revenue, pretax income and pretax margins in the second quarter of 2008 and 2007. The second 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)   Second Quarter Ended                 Less:
                 --------------------      Less:   Acquisitions, Less: Organic
                   Jun 30,  Jun 30,   %   Currency Divestitures,  All  Revenue
    Revenue         2008     2007  Change  Impact    Transfers   Other  Growth
                 --------- ------- ------ -------- ------------  ------ ------
    Americas        $625     $618      1%     2%        -%          -%    (1)%
    U.K.             223      218      2      2         1          (2)     1
    EMEA             382      307     24     15         -           2      7
    Asia Pacific     152      138     10     10        (2)          1      1
    Reinsurance      251      234      7      6         6          (7)     2
                 --------- ------- ------ -------- ------------  ------ ------
    Total         $1,633   $1,515      8%     6%        1%         (1)%    2%
                 ========= ======= ====== ======== ============  ====== ======


Risk and Insurance Brokerage Services revenue increased 8% compared to the prior year quarter with organic revenue growth of 2%. Americas organic revenue decreased 1% reflecting a slowdown in private equity and commercial construction activity in U.S. Retail and soft market conditions, partially offset by strong growth in Latin America. U.K. organic revenue increased 1% due primarily to growth in Affinity products. EMEA organic revenue increased 7% 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 2% due primarily to growth in global facultative placements and capital markets transactions, partially offset by soft market conditions and higher cedent retentions.



                                            Second Quarter Ended
                                          ------------------------
    (millions)                             Jun 30,        Jun 30,         %
                                            2008           2007        Change
                                          --------       ---------    --------
    Revenue                                $1,633         $1,515          8%
    Expenses
        Compensation and benefits             933            884          6
        Other expenses                        466            382         22
                                          --------       ---------    --------
      Total operating expenses              1,399          1,266         11

      Operating income                       $234           $249         (6)%
        Other (income) expense                 (1)           (29)       (97)
                                          --------       ---------    --------
    Pretax income                            $235           $278        (15)%
                                          ========       =========    ========
    Pretax margin                            14.4%          18.3%

    Pretax income - adjusted                 $295           $269         10%
    Pretax margin - adjusted                 18.1%          17.8%


Compensation and benefits for the second quarter increased 6% or $49 million from the prior year quarter including a $47 million unfavorable impact from foreign currency translation, $11 million increase in restructuring costs and investments in key talent, partially offset by benefits related to the 2005 and 2007 restructuring programs. Other expenses increased 22% or $84 million compared to the prior year quarter including $20 million of legacy litigation accruals, an $18 million unfavorable impact from foreign currency translation, $17 million increase in restructuring costs and $11 million for the previously disclosed reviews under the Foreign Corrupt Practices Act (FCPA) and similar laws in other countries and related compliance initiatives.

Second quarter pretax income decreased 15% to $235 million. Adjusting for certain items detailed on page 11 of this press release, pretax income increased 10% to $295 million and pretax margin increased 30 basis points to 18.1% versus the prior year quarter. Absent the $20 million of legacy litigation accruals in the second quarter, adjusted pretax margin would have increased 150 basis points from the prior year quarter.



    CONSULTING

    (millions) Second Quarter Ended                  Less:
               --------------------       Less:   Acquisitions, Less:  Organic
                  Jun 30, Jun 30,   %    Currency Divestitures,  All   Revenue
    Revenue        2008    2007   Change  Impact    Transfers   Other   Growth
    -------      -------- ------- ------ -------- ------------- ------ -------
    Services       $279    $269     4%      4%        (1)%       (2)%     3%
    Outsourcing      57      56     2       1         (1)         2       -
                 -------- ------- ------ -------- ------------- ------ -------
    Total          $336    $325     3%      4%        (1)%       (2)%     2%
                 ======== ======= ====== ======== ============= ====== =======


Consulting revenue increased 3% to $336 million compared to the prior year quarter. The prior year quarter revenue included a $5 million gain from the sale of an equity investment. Organic revenue in Consulting Services increased 3% reflecting growth internationally in retirement and health and benefits consulting. Organic revenue in Outsourcing was similar to the prior year quarter due primarily to modest growth in benefits outsourcing, offset by a decline related to the previously announced termination of a significant outsourcing contract.



                                            Second Quarter Ended
                                           ----------------------
    (millions)                             Jun 30,       Jun 30,         %
                                            2008          2007         Change
                                           -------       --------     --------
    Revenue                                 $336          $325            3%
    Expenses
        Compensation and benefits            205           198            4

        Other expenses                        89            83            7
                                           -------       --------     --------
      Total operating expenses               294           281            5

      Operating income                       $42           $44           (5)%
        Other (income) expense                (1)            -          N/A
                                           -------       --------     --------
    Pretax income                            $43           $44           (2)%
                                           =======       ========     ========
    Pretax margin                           12.8%         13.5%

    Pretax income - adjusted                 $47           $48           (2)%
    Pretax margin - adjusted                14.0%         14.8%


Compensation and benefits for the second quarter increased 4% or $7 million from the prior year quarter including an $8 million unfavorable impact from foreign currency translation and investments in key talent, partially offset by benefits related to the 2005 restructuring program. Other expenses increased 7% or $6 million compared to the prior year quarter including a $3 million unfavorable impact from foreign currency translation.

Second quarter pretax income decreased 2% to $43 million and the pretax margin decreased 70 basis points to 12.8% versus the prior year quarter. Adjusting for certain items detailed on page 11, pretax income decreased 2% to $47 million and the pretax margin decreased 80 basis points to 14.0%. Absent the $5 million equity investment gain recorded in the prior year quarter, adjusted pretax margin for the second quarter would have increased 60 basis points from the prior year quarter.



    UNALLOCATED INCOME AND EXPENSE

                                              Second Quarter Ended
                                              ---------------------
    (millions)                                Jun 30,       Jun 30,       %
                                               2008          2007       Change
                                              -------       -------     ------
    Operating segment income before tax        $278          $322        (14)%
    Property & Casualty operations               (1)           (2)       (50)
    Unallocated investment income                17            29        (41)
    Unallocated expenses                        (37)          (34)         9
    Interest expense                            (31)          (34)        (9)
                                              -------       -------     ------
    Income from continuing
     operations before tax                     $226          $281        (20)%
                                              =======       =======     ======

Property & Casualty loss declined $1 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 second quarter decreased $12 million to $17 million compared to the prior year quarter. The Company recorded no income during the second quarter related to certain private equity investments compared to $26 million in the prior year quarter, as the timing of distributions are subject to completed transactions in the underlying portfolios. The decline in income from these private equity investments was partially offset by interest income on higher cash balances. Unallocated expenses increased $3 million to $37 million versus the prior year quarter due primarily to absorbed costs previously allocated to the insurance underwriting businesses. Interest expense decreased $3 million to $31 million due primarily to redemption of the Company's outstanding convertible debt in November 2007.

Conference Call and Webcast Details

The Company will host a conference call on Friday, August 1, 2008 at 10:00 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, and the cost of resolution of other contingent liabilities and loss contingencies. 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:                  Media Contact:
    Scott Malchow                      David Prosperi
    Vice President, Investor Relations Vice President, Global Public Relations
    312-381-3983                       312-381-2485



    Aon Corporation
    Consolidated Summary of Operations (Unaudited)

                         Second Quarter Ended          Six Months Ended
                    ----------------------------  ----------------------------
    (millions except June 30,  June 30,  Percent  June 30,   June 30,  Percent
     per share data)  2008       2007    Change     2008       2007    Change
                    --------  --------  --------  --------  --------  --------
    Revenue
    --------
      Commissions,
       fees and
       other         $1,912     $1,776      8%     $3,785     $3,505       8%
      Investment
       income            68         90    (24)        127        159     (20)
                    --------  --------  --------  --------  --------  --------
        Total
         revenue      1,980      1,866      6       3,912      3,664       7
                    --------  --------  --------  --------  --------  --------

    Expenses
    ---------
      Compensation
       and benefits   1,155      1,109      4       2,321      2,162       7
      Other
       general
       expenses         512        425     20         943        848      11
      Depreciation
       and
       amortization      58         46     26         108         93      16
                    --------  --------  --------  --------  --------  --------
        Total
         operating
         expenses     1,725      1,580      9       3,372      3,103       9
                    --------  --------  --------  --------  --------  --------
    Operating
     income             255        286    (11)        540        561      (4)

      Interest
       expense           31         34     (9)         64         69      (7)
      Other income       (2)       (29)   (93)         (6)       (29)    (79)
                    --------  --------  --------  --------  --------  --------
    Income from
     continuing
     operations
     before
     provision for
     income tax         226        281    (20)        482        521      (7)
      Provision
       for income
       tax (1)           58         98    (41)        135        173     (22)
                    --------  --------  --------  --------  --------  --------
    Income from
     continuing
     operations         168        183     (8)        347        348       -

    Discontinued
     operations
      Income from
       discontinued
       operations     1,428         87  1,541       1,491        160     832
      Provision for
       income
       tax (2)          463         30  1,443         487         55     785
                    --------  --------  --------  --------  --------  --------
    Income from
     discontinued
     operations         965         57  1,593       1,004        105     856
                    --------  --------  --------  --------  --------  --------

    Net income       $1,133       $240    372%     $1,351       $453     198%
                    ========  ========  ========  ========  ========  ========

    Basic net
     income per
     share:
      Continuing
       operations     $0.58      $0.62     (6)%     $1.17      $1.18      (1)%
      Discontinued
       operations      3.33       0.19  1,653        3.38       0.35     866
                    --------  --------  --------  --------  --------  --------
      Net income      $3.91      $0.81    383%      $4.55      $1.53     197%
                    ========  ========  ========  ========  ========  ========

    Diluted net
     income per
     share:
      Continuing
       operations     $0.55      $0.57     (4)%     $1.11      $1.09       2%
      Discontinued
       operations      3.16       0.18  1,656        3.21       0.32     903
                    --------  --------  --------  --------  --------  --------
      Net income      $3.71      $0.75    395%      $4.32      $1.41     206%
                    ========  ========  ========  ========  ========  ========

    Weighted average
     common shares
     outstanding -
     diluted          305.3      321.9     (5)%     312.5     323.1       (3)%
                    ========  ========  ========  ========  ========  ========

    (1) Tax rate from continuing operations is 25.7% and 34.9% for the second
        quarters ended June 30, 2008 and 2007, respectively, and 28.0% and
        33.2% for the six months ended June 30, 2008 and 2007, respectively.
    (2) Tax rate from discontinued operations is 32.4% and 34.5% for the
        second quarters ended June 30, 2008 and 2007, respectively, and 32.7%
        and 34.4% for the six months ended June 30, 2008 and 2007,
        respectively.



    Aon Corporation
    Revenue from Continuing Operations (Unaudited)

                                    Second Quarter Ended
               ---------------------------------------------------------------
                                                     Less:      Less: Organic
                                           Less:  Acquisitions,  All  Revenue
               June 30, June 30, Percent Currency Divestitures  Other Growth
    (millions)   2008     2007    Change  Impact   & Transfers   (1)    (2)
               -------  -------  ------- -------  ------------ ------- -------
    Revenue
    -------
    Risk and
     Insurance
     Brokerage
     Services:
     Americas     $625    $618       1%     2%          -%       -%      (1)%
     United
      Kingdom      223     218       2      2           1       (2)       1
     Europe,
      Middle
      East &
      Africa       382     307      24     15           -        2        7
     Asia
      Pacific      152     138      10     10          (2)       1        1
     Reinsurance
      brokerage
      and
      related
      services     251     234       7      6           6       (7)       2
               -------  -------  ------- -------  ------------ ------- -------
      Total
       Risk and
       Insurance
       Brokerage
       Services  1,633   1,515       8      6           1       (1)       2
               -------  -------  ------- -------  ------------ ------- -------

    Consulting:
     Consulting
      services     279     269       4      4          (1)      (2)       3
     Outsourcing    57      56       2      1          (1)       2        -
               -------  -------  ------- -------  ------------ ------- -------
      Total
       Consulting  336     325       3      4          (1)      (2)       2
               -------  -------  ------- -------  ------------ ------- -------

    Unallocated
     revenue        18      32     (44)   N/A         N/A      N/A      N/A

    Intersegment
     revenues       (7)     (6)    N/A    N/A         N/A      N/A      N/A
               -------  -------  ------- -------  ------------ ------- -------
      Total     $1,980  $1,866       6%     5%          -%      (1)%      2%
               =======  =======  ======= =======  ============ ======= =======

    (1)  Includes the impact of investment income, reimbursable expenses and
         unusual items.
    (2)  Organic revenue growth excludes the impact of foreign exchange,
         acquisitions, divestitures, transfers and items described in (1).



    Aon Corporation
    Revenue from Continuing Operations (Unaudited)

                                         Six Months Ended
              ----------------------------------------------------------------
                                                     Less:      Less: Organic
                                         Less:     Acquisitions, All  Revenue
              June 30, June 30, Percent Currency  Divestitures  Other Growth
    (millions)  2008     2007   Change   Impact    & Transfers   (1)    (2)
               -------  -------  ------- -------  ------------ ------- -------
    Revenue
    --------
    Risk and
     Insurance
     Brokerage
     Services:
     Americas  $1,156  $1,137      2%       2%        -%        -%      -%
     United
      Kingdom     384     374      3        2         1         -       -
     Europe,
      Middle
      East &
      Africa      907     741     22       14         1         2       5
     Asia
      Pacific     262     238     10       10        (1)       (1)      2
     Reinsurance
      brokerage
      and
      related
      services    515     481      7        6         3        (3)      1
               -------  -------  ------- -------  ------------ ------- -------
      Total
       Risk and
       Insurance
       Brokerage
       Services 3,224   2,971      9        6         -         1       2
               -------  -------  ------- -------  ------------ ------- -------
    Consulting:
     Consulting
      services    568     533      7        5         -        (2)      4
     Outsourcing  111     121     (8)       2        (1)        -      (9)
               -------  -------  ------- -------  ------------ ------- -------
      Total
       consulting 679     654      4        4        (1)        -       1
               -------  -------  ------- -------  ------------ ------- -------

    Unallocated
     revenue       25      55    (55)     N/A       N/A       N/A     N/A
    Intersegment
     revenues     (16)    (16)   N/A      N/A       N/A       N/A     N/A
               -------  -------  ------- -------  ------------ ------- -------
      Total    $3,912  $3,664      7%       6%        -%       (1)%     2%
               =======  =======  ======= =======  ============ ======= =======

    (1)  Includes the impact of investment income, reimbursable expenses and
         unusual items.
    (2)  Organic revenue growth excludes the impact of foreign exchange,
         acquisitions, divestitures, transfers and items described in (1).



    Aon Corporation - Segments (Unaudited)
    Risk and Insurance Brokerage Services - Continuing Operations
    -------------------------------------------------------------

                            Second Quarter Ended          Six Months Ended
                         -------------------------- --------------------------
                          June 30, June 30,  Percent June 30, June 30, Percent
    (millions)              2008    2007     Change    2008     2007    Change
                         -------- -------- -------- -------- -------- --------
    Revenue
    --------
      Commissions, fees
       and other           $1,584  $1,462      8%     $3,124   $2,873     9%
      Investment income        49      53     (8)        100       98     2
                         -------- -------- -------- -------- -------- --------
        Total revenue       1,633   1,515      8       3,224    2,971     9
                         -------- -------- -------- -------- -------- --------

    Expenses
    ---------
      Compensation and
       benefits               933     884      6       1,884    1,724     9
      Other general
       expenses               466     382     22         866      756    15
                         -------- -------- -------- -------- -------- --------
        Total operating
         expenses           1,399   1,266     11       2,750    2,480    11
                         -------- -------- -------- -------- -------- --------

    Operating income          234     249     (6)        474      491    (3)
      Other income             (1)    (29)   (97)         (5)     (29)  (83)
                         -------- -------- -------- -------- -------- --------
    Income before
     provision for income
     tax                     $235    $278    (15)%      $479     $520    (8)%
                         ======== ======== ======== ======== ======== ========

    Pretax income margin     14.4%   18.3%              14.9%    17.5%



    Consulting - Continuing Operations
    ----------------------------------

                              Second Quarter Ended        Six Months Ended
                         -------------------------- --------------------------
    (millions)            June 30, June 30, Percent  June 30, June 30, Percent
                            2008     2007   Change     2008     2007   Change
                         -------- -------- -------- -------- -------- --------
    Revenue
    --------
      Commissions, fees
       and other             $335     $319     5%      $677     $647     5%
      Investment income         1        6   (83)         2        7   (71)
                         -------- -------- -------- -------- -------- --------
        Total revenue         336      325     3        679      654     4
                         -------- -------- -------- -------- -------- --------

    Expenses
    ---------
      Compensation and
       benefits               205      198     4        406      395     3
      Other general
       expenses                89       83     7        168      168     -
                         -------- -------- -------- -------- -------- --------
        Total operating
         expenses             294      281     5        574      563     2
                         -------- -------- -------- -------- -------- --------

    Operating income           42       44    (5)       105       91    15
      Other income             (1)       -   N/A         (1)       -   N/A
                         -------- -------- -------- -------- -------- --------
    Income before
     provision for income
     tax                      $43      $44    (2)%     $106      $91    16%
                         ======== ======== ======== ======== ======== ========

    Pretax income margin     12.8%    13.5%            15.6%    13.9%



    Reconciliation of segment income before provision for income tax to income
    from continuing operations before provision for income tax:

                           Second Quarter Ended           Six Months Ended
                         -------------------------- --------------------------
                         June 30, June 30, Percent  June 30,  June 30, Percent
    (millions)             2008     2007   Change     2008      2007   Change
                         -------- -------- -------- -------- -------- --------
    Segment income
     before provision
     for income tax
      Risk and Insurance
       Brokerage Services  $235     $278    (15)%     $479      $520      (8)%
      Consulting             43       44     (2)       106        91      16
                         -------- -------- -------- -------- -------- --------
        Total segment
         income before
         provision for
         income tax         278      322    (14)       585       611      (4)
    Property & Casualty
     operations              (1)      (2)   (50)        (3)       (4)    (25)
    Unallocated investment
     income                  17       29    (41)        22        51     (57)
    Unallocated expenses    (37)     (34)     9        (58)      (68)    (15)
    Interest expense        (31)     (34)    (9)       (64)      (69)     (7)
                         -------- -------- -------- -------- -------- --------
    Income from
     continuing
     operations before
     provision
     for income tax        $226     $281    (20)%     $482      $521      (7)%
                         ======== ======== ======== ======== ======== ========

    Pretax income margin   11.4%    15.1%             12.3%     14.2%



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

                   Second Quarter Ended             Six Months Ended
                       June 30, 2008                  June 30, 2008
               ------------------------------- -------------------------------
    (millions  Risk and                        Risk and
     except    Insurance      Unallocated      Insurance       Unallocated
     per share Brokerage Cons-  Income &       Brokerage Cons-  Income &
     data)     Services  ulting Expense  Total Services  ulting Expense  Total
                ------- ------- -------- ----- -------- ------- ------- ------

    Revenue as
     reported   $1,633    $336    $11   $1,980  $3,224    $679     $9  $3,912
                ======= ======= ======= ======= ======= ======= ======= ======

    Income
     (loss)
     from
     continuing
     operations
     before
     provision
     for income
     tax - as
     reported     $235     $43   $(52)    $226    $479    $106  $(103)   $482
      Restructuring
       charges      49       4      -       53     106       7      -     113
      Anti-bribery
       and
       compliance
       initiatives  11       -      -       11      25       -      -      25
      Gain on
       sale of
       land          -       -      -        -      (5)      -      -      (5)
                ------- ------- -------- ----- -------- ------- ------- ------
    Income (loss)
     from continuing
     operations
     before
     provision
     for income
     tax - as
     adjusted     $295     $47   $(52)     290    $605    $113  $(103)    615
                ======= ======= =======         ======= ======= =======
    Provision for
     income taxes                           74                            172
                                          -----                         ------
    Income from
     continuing
     operations -
     as adjusted                          $216                           $443
                                        =======                         ======
    Diluted
     earnings
     per share
     from
     continuing
     operations -
     as adjusted                          $0.71                         $1.42
                                        =======                         ======

    Weighted
     average
     common shares
     outstanding -
     diluted                              305.3                         312.5
                                        =======                         ======

    Pretax income
     margins -
     as adjusted  18.1%   14.0%   N/A     14.6%  18.8%   16.6%     N/A   15.7%
                ======= ======= ======= ======= ======= ======= ======= ======



                   Second Quarter Ended                Six Months Ended
                        June 30, 2007                    June 30, 2007
              -------------------------------- -------------------------------
    (millions  Risk and                        Risk and
     except    Insurance       Unallocated     Insurance       Unallocated
     per share Brokerage Cons-  Income &       Brokerage Cons-  Income &
     data)     Services  ulting Expense  Total Services  ulting Expense  Total
              --------- ------- -------- ----- -------- ------- ------- ------

    Revenue
     as
     reported  $1,515     $325   $26   $1,866   $2,971    $654    $39  $3,664
               ======= ======= ======= ======= ======= ======= ======= ======

    Income
     (loss)
     from
     continuing
     operations
     before
     provision
     for income
     tax - as
     reported    $278      $44    $(41)  $281     $520     $91   $(90)   $521
      Restructuring
       charges     21        4       -     25       28       6       -     34
      Gain on
       sale of
       businesses (30)       -       -    (30)     (30)      -       -    (30)
      Reinsurance
       litigation   -        -       -      -       21       -       -     21
                ------- ------- -------- ----- -------- ------- ------- ------
    Income
     (loss)
     from
     continuing
     operations
     before
     provision
     for income
     tax - as
     adjusted    $269      $48    $(41)   276     $539     $97    $(90)   546
                ======= ======= =======         ======= ======= =======
    Provision
     for income
     taxes                                 93                             178
                                        -------                         ------
    Income from
     continuing
     operations -
     as adjusted                         $183                            $368
                                        =======                         ======
    Diluted
     earnings
     per share
     from
     continuing
     operations -
     as adjusted                        $0.57                           $1.15
                                        =======                         ======

    Weighted
     average
     common shares
     outstanding -
     diluted                            321.9                           323.1
                                        =======                         ======

    Pretax
     income margins
     - as
     adjusted    17.8%    14.8%    N/A  14.8%     18.1%   14.8%    N/A   14.9%
                ======= ======= ======= ======= ======= ======= ======= ======

    (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.



    Aon Corporation
    2007 Restructuring Plan (Unaudited)

    By Type:                              Actual                     Estimated
                        -------------------------------------------  ---------
                                  First  Second    Six      Total
                                 Quarter Quarter  Months   Incurred
    (millions)          2007      2008    2008     2008     to Date    Total
                        -------------------------------------------  ---------
    Workforce reduction
     (Compensation
      and benefits)      $17       $51     $25      $76       $93      $185
    Lease consolidation
     (Other general
      expenses)           22         5      13       18        40        95
    Asset impairments
     (Depreciation and
      amortization)        4         2      12       14        18        52
    Other costs associated
     with restructuring
     (Other general
      expenses)            3         2       3        5         8        28
                        -------------------------------------------  ---------
    Total
     restructuring and
     related expenses    $46       $60     $53     $113      $159      $360
                        ===========================================  =========



    By Segment:                           Actual                     Estimated
                        -------------------------------------------  ---------
                                  First  Second    Six      Total
                                 Quarter Quarter  Months   Incurred
    (millions)          2007      2008    2008     2008     to Date    Total
                        -------------------------------------------  ---------
     Risk and Insurance
      Brokerage
      Services           $41       $57     $49     $106      $147       $307
     Consulting            5         3       4        7        12         53
                        -------------------------------------------  ---------
     Total restructuring
      and related
      expenses           $46       $60     $53     $113      $159       $360
                        ===========================================  =========



    Aon Corporation
    Condensed Consolidated Statements of Financial Position

                                                         As of
                                             ---------------------------------
    (millions)                               Jun. 30, 2008   Dec. 31, 2007 (2)
    ---------------------------------------  -------------   -----------------
                                              (Unaudited)
    ASSETS
    -------
      CURRENT ASSETS
      Cash                                        $466            $584
      Short-term investments                     2,566           1,209
      Receivables                                2,012           2,002
      Net fiduciary assets (1)                  11,358           9,498
      Other current assets                         229             292
      Assets held for sale                           -           4,388
                                             -------------   -----------------
        Total Current Assets                    16,631          17,973
      Goodwill                                   5,137           4,935
      Other intangible assets                      245             204
      Fixed assets, net                            483             498
      Long-term investments                        414             417
      Other non-current assets                   1,165             921
                                             -------------   -----------------
      TOTAL ASSETS                             $24,075         $24,948
                                             =============   =================

    LIABILITIES AND STOCKHOLDERS' EQUITY
    ------------------------------------
      CURRENT LIABILITIES
      Net fiduciary liabilities                $11,358          $9,498
      Short-term debt                                -             252
      Accounts payable and accrued liabilities   1,207           1,418
      Other current liabilities                    694             360
      Liabilities held for sale                      -           3,025
                                             -------------   -----------------
        Total Current Liabilities               13,259          14,553
      Long-term debt                             2,022           1,893
      Pension, post employment and
       post retirement liabilities               1,296           1,251
      Other non-current liabilities              1,043           1,030
                                             -------------   -----------------
      TOTAL LIABILITIES                         17,620          18,727
      TOTAL STOCKHOLDERS' EQUITY                 6,455           6,221
                                             -------------   -----------------
      TOTAL LIABILITIES AND STOCKHOLDERS'
       EQUITY                                  $24,075         $24,948
                                             =============   =================

    (1) Includes short-term investments:  2008 - $3,521; 2007 - $3,122.
    (2) Certain amounts have been reclassified to conform to the 2008
        presentation.

SOURCE  Aon Corporation
    -0-                             07/31/2008
    /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/
    /Web site:  http://www.aon.com /
    (AOC)

CO:  Aon Corporation
ST:  Illinois
IN:  INS FIN
SU:  ERN CCA ERP

JP-AH
-- AQTH509 --
2580 07/31/2008 16:01 EDT http://www.prnewswire.com
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