QuickLinks -- Click here to rapidly navigate through this document
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):December 3, 2001
Aon CORPORATION
(Exact name of Registrant as Specified in Its Charter)
Delaware (State or Other Jurisdiction of Incorporation) | 1-7933 (Commission File Number) | 36-3051915 (IRS Employer Identification No.) |
200 East Randolph Street, Chicago, Illinois (Address of Principal Executive Offices) | 60601 (Zip Code) |
Registrant's Telephone Number, Including Area Code:(312) 381-1000
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
- (a)
- Not applicable.
- (b)
- Pro forma financial information
Aon Corporation
Pro Forma Condensed Consolidated Financial Information
Aon Corporation is a holding company that is comprised of a family of insurance brokerage, consulting and insurance underwriting subsidiaries. Through our insurance brokerage and other services and consulting operations, we offer commercial insurance brokerage, alternative risk solutions, risk management, employee benefit and human resources consulting and managing general underwriting services. In addition, our insurance underwriting businesses provide a variety of insurance products, including supplemental accident and health coverage, traditional life insurance and extended warranties. Our revenues were $7.4 billion in 2000. Based on 2000 insurance brokerage and consulting revenues, we are the second largest insurance brokerage company in the world.
On April 20, 2001, our Board of Directors approved, in principle, a plan to spin-off our underwriting businesses to our common stockholders, creating two independent, publicly traded companies. The spin-off would take the form of a tax-free dividend of the outstanding shares of common stock of Combined Specialty Corporation (CSC), a new company formed to hold our underwriting businesses. The transaction requires final board approval, a favorable ruling from the Internal Revenue Service and certain insurance regulatory approvals, and it is currently expected to be completed in Spring 2002.
The underwriting businesses we plan to spin-off are mainly reflected in our insurance underwriting segment, one of our three operating segments. This segment currently provides supplemental accident and health and life insurance and extended warranty and property and casualty insurance products through five major subsidiaries: Combined Insurance Company of America, Combined Life Insurance Company of New York, Virginia Surety Company, Inc., London General Insurance Company Limited and Aon Warranty Group, Inc. These subsidiaries hold virtually all of our fixed maturity investments (principally reflected in our insurance underwriting segment) and equity security investments and limited partnership interests (primarily reflected in our corporate and other segment).
The Pro Forma Condensed Consolidated Statements of Income for the nine months ended September 30, 2001 and the year ended December 31, 2000 are presented on a basis as if the spin-off occurred on January 1, 2000. The Pro Forma Condensed Consolidated Statement of Financial Position as of September 30, 2001 is presented on a basis of recording the effect of the spin-off as of September 30, 2001. The Pro Forma Condensed Consolidated Financial Information is based on various assumptions made by Aon's management as of the current date, including assumptions regarding allocations of assets and liabilities that are expected to be transferred to CSC prior to the spin-off. The actual basis on which the spin-off is effected may vary materially from the assumptions based upon the terms of any final Internal Revenue Service approval, Board of Directors approval, regulatory approval and other factors. The Pro Forma Condensed Consolidated Financial Information does not purport to be indicative of the financial condition or results of operations that would actually have been reported had the spin-off been completed on the date indicated or that may be reported in the future. It also does not reflect the effect of any possible financings. Except for the Aon historical condensed consolidated statement of income data for the year ended December 31, 2000, which was derived from Aon's audited historical financial statements, the Pro Forma Condensed Consolidated Financial Information is unaudited.
This Pro Forma Condensed Consolidated Financial Information does not include certain disclosures required in accordance with accounting principles generally accepted in the United States and, therefore, should be read in conjunction with Aon's historical financial statements and notes thereto.
Dated: December 3, 2001
2
Aon Corporation
Pro Forma Condensed Consolidated Statement of Income
(millions, except per share data)
| Nine Months Ended September 30, 2001 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Pro Forma Adjustments | | ||||||||||||
| Historical Aon | Less CSC | Plus Adjustments | Pro Forma Aon | |||||||||||
Revenue | |||||||||||||||
Brokerage commissions and fees | $ | 3,925 | $ | 182 | $ | — | $ | 3,743 | |||||||
Premiums and other | 1,510 | 1,510 | — | ||||||||||||
Investment income (1)(2)(3) | 205 | 95 | 9 | 119 | |||||||||||
Total revenue | 5,640 | 1,787 | 9 | 3,862 | |||||||||||
Expenses | |||||||||||||||
General expenses | 4,303 | 848 | 3,455 | ||||||||||||
Benefits to policyholders | 823 | 823 | — | ||||||||||||
Interest expense (3)(4) | 98 | 32 | 9 | 75 | |||||||||||
Amortization of intangible assets | 118 | 6 | 112 | ||||||||||||
Unusual expenses—World Trade Center | 53 | 45 | 8 | ||||||||||||
Total expenses | 5,395 | 1,754 | 9 | 3,650 | |||||||||||
Income Before Income Tax and Minority Interest | 245 | 33 | 212 | ||||||||||||
Provision for income tax | 95 | 12 | 83 | ||||||||||||
Income Before Minority Interest | 150 | 21 | 129 | ||||||||||||
Minority interest—8.205% trust preferred capital securities | (30 | ) | (30 | ) | |||||||||||
Income from Continuing Operations | $ | 120 | $ | 21 | $ | — | $ | 99 | |||||||
Average Shares Outstanding—Basic | 268 | 268 | |||||||||||||
Average Shares Outstanding—Fully Diluted | 271 | 271 | |||||||||||||
Basic Income from Continuing Operations Per Share | $ | 0.44 | $ | 0.36 | |||||||||||
Fully Diluted Income from Continuing Operations Per Share | $ | 0.44 | $ | 0.36 | |||||||||||
- (1)
- Historical Aon investment income by segment is as follows:
Insurance brokerage and other services | $ | 127 | |||||||||
Consulting | 4 | ||||||||||
Insurance underwriting | 170 | ||||||||||
Corporate and other | (96 | ) | |||||||||
Total | $ | 205 | |||||||||
- (2)
- CSC investment income includes a loss of $56 million for the change in valuation on private limited partnership investments.
- (3)
- Investment income and interest expense have been increased by $9 million to reflect interest on debt owed to CSC by Aon which was previously eliminated in consolidation.
- (4)
- As part of the spin-off, it is anticipated that CSC will effectively be allocated debt from Aon. The interest on this allocation is $32 million for the nine months ended September 30, 2001.
Dated: December 3, 2001
3
Aon Corporation
Pro Forma Condensed Consolidated Statement of Income
(millions, except per share data)
| Year Ended December 31, 2000 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Pro Forma Adjustments | | ||||||||||||
| Historical Aon | Less CSC | Plus Adjustments | Pro Forma Aon | |||||||||||
Revenue | |||||||||||||||
Brokerage commissions and fees | $ | 4,946 | $ | 229 | $ | — | $ | 4,717 | |||||||
Premiums and other | 1,921 | 1,921 | — | ||||||||||||
Investment income(1)(2)(3) | 508 | 340 | 20 | 188 | |||||||||||
Total revenue | 7,375 | 2,490 | 20 | 4,905 | |||||||||||
Expenses | |||||||||||||||
General expenses | 5,190 | 1,060 | 4,130 | ||||||||||||
Benefits to policyholders | 1,037 | 1,037 | — | ||||||||||||
Interest expense(3)(4) | 140 | 42 | 20 | 118 | |||||||||||
Amortization of intangible assets | 154 | 9 | 145 | ||||||||||||
Total expenses | 6,521 | 2,148 | 20 | 4,393 | |||||||||||
Income Before Income Tax, Minority Interest and Accounting Change | 854 | 342 | 512 | ||||||||||||
Provision for income tax | 333 | 127 | 206 | ||||||||||||
Income Before Minority Interest and Accounting Change | 521 | 215 | 306 | ||||||||||||
Minority interest—8.205% trust preferred capital securities | (40 | ) | (40 | ) | |||||||||||
Income from Continuing Operations Before Accounting Change | $ | 481 | $ | 215 | $ | — | $ | 266 | |||||||
Average Shares Outstanding—Basic | 260 | 260 | |||||||||||||
Average Shares Outstanding—Fully Diluted | 263 | 263 | |||||||||||||
Basic Income from Continuing Operations Before Accounting Change Per Share | $ | 1.84 | $ | 1.01 | |||||||||||
Fully Diluted Income from Continuing Operations Before Accounting Change Per Share | $ | 1.82 | $ | 1.00 | |||||||||||
- (1)
- Historical Aon investment income by segment is as follows:
Insurance brokerage and other services | $ | 186 | |||||||||
Consulting | 6 | ||||||||||
Insurance underwriting | 245 | ||||||||||
Corporate and other | 71 | ||||||||||
Total | $ | 508 | |||||||||
- (2)
- CSC investment income includes revenue of $73 million for the change in valuation on private limited partnership investments.
- (3)
- Investment income and interest expense have been increased by $20 million to reflect interest on debt owed to CSC by Aon which was previously eliminated in consolidation.
- (4)
- As part of the spin-off, it is anticipated that CSC will effectively be allocated debt from Aon. The interest on this allocation is $42 million for the year ended December 31, 2000.
Dated: December 3, 2001
4
Aon Corporation
Pro Forma Condensed Consolidated Statement of Financial Position
(millions)
| As of September 30, 2001 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Pro Forma Adjustments | | ||||||||||||||
| Historical Aon | Less CSC | Plus Adjustments | Pro Forma Aon | |||||||||||||
Assets: | |||||||||||||||||
Fixed maturities at fair value(1) | $ | 2,336 | $ | 2,511 | $ | 197 | $ | 22 | |||||||||
Equity securities at fair value | 416 | 400 | 16 | ||||||||||||||
Short-term investments | 2,899 | 645 | 2,254 | ||||||||||||||
Other investments | 736 | 713 | 23 | ||||||||||||||
Total Investments | 6,387 | 4,269 | 197 | 2,315 | |||||||||||||
Cash | 498 | 79 | 419 | ||||||||||||||
Receivables | 8,353 | 1,084 | 7,269 | ||||||||||||||
Intangible assets | 4,095 | 281 | 3,814 | ||||||||||||||
Other assets | 3,512 | 1,702 | 1,810 | ||||||||||||||
TOTAL ASSETS | $ | 22,845 | $ | 7,415 | $ | 197 | $ | 15,627 | |||||||||
Liabilities and Stockholders' Equity: | |||||||||||||||||
Insurance premiums payable | $ | 8,722 | $ | 7 | $ | — | $ | 8,715 | |||||||||
Policy liabilities | 5,034 | 5,034 | — | ||||||||||||||
General liabilities | |||||||||||||||||
General expenses | 1,685 | 137 | 1,548 | ||||||||||||||
Short-term borrowings | 193 | 193 | |||||||||||||||
Notes payable(1)(2) | 1,660 | 600 | 197 | 1,257 | |||||||||||||
Other liabilities | 1,075 | 548 | 527 | ||||||||||||||
TOTAL LIABILITIES | 18,369 | 6,326 | 197 | 12,240 | |||||||||||||
Redeemable preferred stock | 50 | 50 | |||||||||||||||
Company-obligated mandatorily redeemable preferred capital securities of subsidiary trust holding solely the company's junior subordinated debentures | 800 | 800 | |||||||||||||||
Stockholders' equity | |||||||||||||||||
Common stock | 292 | 292 | |||||||||||||||
Paid-in-capital | 1,650 | 1,650 | |||||||||||||||
Accumulated other comprehensive loss | (377 | ) | (122 | ) | (255 | ) | |||||||||||
Retained earnings | 3,060 | 1,211 | 1,849 | ||||||||||||||
Less: Treasury stock at cost | (807 | ) | (807 | ) | |||||||||||||
Deferred compensation | (192 | ) | (192 | ) | |||||||||||||
TOTAL STOCKHOLDERS' EQUITY | 3,626 | 1,089 | 2,537 | ||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 22,845 | $ | 7,415 | $ | 197 | $ | 15,627 | |||||||||
- (1)
- Fixed maturities and notes payable have been increased by $197 million to reflect debt owed to CSC by Aon which was previously eliminated in consolidation.
- (2)
- As part of the spin-off, it is anticipated that CSC will effectively be allocated $600 million of debt from Aon.
Dated: December 3, 2001
- (c)
- Exhibits.
None.
5
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AON CORPORATION | ||||
By: | /s/ RAYMOND I. SKILLING Raymond I. Skilling Executive Vice President and Chief Counsel |
Date: December 3, 2001
6
Pro Forma Condensed Consolidated Financial Information
Pro Forma Condensed Consolidated Statement of Income (Nine Months Ended September 30, 2001)
Pro Forma Condensed Consolidated Statement of Income (Year Ended December 31, 2000)
Pro Forma Condensed Consolidated Statement of Financial Position
SIGNATURES