Consolidated Statements of Inco
Consolidated Statements of Income (USD $) | |||
In Millions, except Per Share data | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Revenue | |||
Commissions, fees and other | $7,521 | $7,357 | $7,054 |
Fiduciary investment income | 74 | 171 | 180 |
Total revenue | 7,595 | 7,528 | 7,234 |
Expenses | |||
Compensation and benefits | 4,597 | 4,581 | 4,341 |
Other general expenses | 1,977 | 2,007 | 1,890 |
Total operating expenses | 6,574 | 6,588 | 6,231 |
Operating income | 1,021 | 940 | 1,003 |
Interest income | 30 | 94 | 100 |
Interest expense | (122) | (126) | (138) |
Other income (expense) | 20 | (29) | 58 |
Income from continuing operations before income taxes | 949 | 879 | 1,023 |
Income taxes | 268 | 242 | 348 |
Income from continuing operations | 681 | 637 | 675 |
Income from discontinued operations before income taxes | 83 | 1,256 | 330 |
Income taxes | (28) | 415 | 128 |
Income from discontinued operations | 111 | 841 | 202 |
Net income | 792 | 1,478 | 877 |
Less: Net income attributable to noncontrolling interests | 45 | 16 | 13 |
Net income attributable to Aon stockholders | 747 | 1,462 | 864 |
Net income attributable to Aon stockholders | |||
Income from continuing operations | 636 | 621 | 662 |
Income from discontinued operations | 111 | 841 | 202 |
Net income | $747 | $1,462 | $864 |
Basic net income per share attributable to Aon stockholders | |||
Continuing operations (in dollars per share) | 2.25 | 2.12 | 2.17 |
Discontinued operations (in dollars per share) | 0.39 | 2.87 | 0.66 |
Net income (in dollars per share) | 2.64 | 4.99 | 2.83 |
Diluted net income per share attributable to Aon stockholders | |||
Continuing operations (in dollars per share) | 2.19 | 2.04 | 2.04 |
Discontinued operations (in dollars per share) | 0.38 | 2.76 | 0.62 |
Net income (in dollars per share) | 2.57 | 4.8 | 2.66 |
Cash dividends per share paid on common stock (in dollars per share) | 0.6 | 0.6 | 0.6 |
Weighted average common shares outstanding - basic (in shares) | 283.2 | 292.8 | 305 |
Weighted average common shares outstanding - diluted (in shares) | 291.1 | 304.5 | 326.9 |
Consolidated Statements of Fina
Consolidated Statements of Financial Position (USD $) | ||
In Millions | Dec. 31, 2009
| Dec. 31, 2008
|
CURRENT ASSETS | ||
Cash and cash equivalents | $217 | $582 |
Short-term investments | 422 | 684 |
Receivables, net | 2,052 | 1,990 |
Fiduciary assets | 10,835 | 10,678 |
Other current assets | 463 | 355 |
Assets held for sale | 237 | |
Total Current Assets | 13,989 | 14,526 |
Goodwill | 6,078 | 5,637 |
Intangible assets, net | 791 | 779 |
Fixed assets, net | 461 | 451 |
Investments | 319 | 332 |
Deferred tax assets | 881 | 795 |
Other non-current assets | 439 | 420 |
TOTAL ASSETS | 22,958 | 22,940 |
CURRENT LIABILITIES | ||
Fiduciary liabilities | 10,835 | 10,678 |
Short-term debt and current portion of long-term debt | 10 | 105 |
Accounts payable and accrued liabilities | 1,535 | 1,560 |
Other current liabilities | 260 | 314 |
Liabilities held for sale | 146 | |
Total Current Liabilities | 12,640 | 12,803 |
Long-term debt | 1,998 | 1,872 |
Deferred tax liabilities | 129 | 118 |
Pension and other post employment liabilities | 1,889 | 1,694 |
Other non-current liabilities | 871 | 1,038 |
TOTAL LIABILITIES | 17,527 | 17,525 |
EQUITY | ||
Common stock-$1 par value Authorized: 750 shares (issued: 2009 - 362.7; 2008 - 361.7) | 363 | 362 |
Additional paid-in capital | 3,215 | 3,220 |
Retained earnings | 7,335 | 6,816 |
Treasury stock at cost (shares: 2009 - 96.4; 2008 - 89.9) | (3,859) | (3,626) |
Accumulated other comprehensive loss | (1,675) | (1,462) |
TOTAL AON STOCKHOLDERS' EQUITY | 5,379 | 5,310 |
Noncontrolling interest | 52 | 105 |
TOTAL EQUITY | 5,431 | 5,415 |
TOTAL LIABILITIES AND EQUITY | $22,958 | $22,940 |
1_Consolidated Statements of Fi
Consolidated Statements of Financial Position (Parenthetical) (USD $) | ||
Share data in Millions, except Per Share data | Dec. 31, 2009
| Dec. 31, 2008
|
Consolidated Statements of Financial Position | ||
Common stock, par value (in dollars per share) | $1 | $1 |
Common stock, Authorized shares | 750 | 750 |
Common stock, issued shares | 362.7 | 361.7 |
Treasury stock, shares | 96.4 | 89.9 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity (USD $) | ||||||
In Millions | Common Stock and Additional Paid-in Capital
| Retained Earnings
| Treasury Stock
| Accumulated Other Comprehensive Loss, Net of Tax
| Non-controlling Interests
| Total
|
Balance at Dec. 31, 2006 | $2,930 | $4,992 | ($1,694) | ($1,010) | $33 | $5,251 |
Balance (in shares) at Dec. 31, 2006 | 346.9 | |||||
Increase (Decrease) in Equity | ||||||
Net income | 864 | 13 | 877 | |||
Redemption of convertible debentures | 286 | 286 | ||||
Redemption of convertible debentures (in shares) | 14 | |||||
Shares issued - employee benefit plans | 325 | 325 | ||||
Shares purchased | (751) | (751) | ||||
Shares reissued - employee benefit plans | (360) | (73) | 360 | (73) | ||
Tax benefit - employee benefit plans | 40 | 40 | ||||
Stock compensation expense | 204 | 204 | ||||
Dividends to stockholders | (176) | (176) | ||||
Change in net derivative gains/losses | 9 | 9 | ||||
Change in net unrealized investment gains/losses | 3 | 3 | ||||
Net foreign currency translation adjustments | 166 | 1 | 167 | |||
Net post-retirement benefit obligation | 106 | 106 | ||||
Purchase of subsidiary shares from noncontrolling interests | (1) | (1) | ||||
Capital contribution by noncontrolling interests | 1 | 1 | ||||
Dividends paid to noncontrolling interests on subsidiary common stock | (7) | (7) | ||||
Total Comprehensive Income | 1,162 | |||||
Balance at Dec. 31, 2007 | 3,425 | 5,607 | (2,085) | (726) | 40 | 6,261 |
Balance (in shares) at Dec. 31, 2007 | 361.3 | |||||
Increase (Decrease) in Equity | ||||||
Net income | 1,462 | 16 | 1,478 | |||
Shares issued - employee benefit plans | 247 | 247 | ||||
Shares issued-employee benefit plans (in shares) | 0.4 | |||||
Shares purchased | (1,924) | (1,924) | ||||
Shares reissued - employee benefit plans | (383) | (82) | 383 | (82) | ||
Tax benefit - employee benefit plans | 45 | 45 | ||||
Stock compensation expense | 248 | 248 | ||||
Dividends to stockholders | (171) | (171) | ||||
Change in net derivative gains/losses | (37) | (37) | ||||
Change in net unrealized investment gains/losses | (20) | (20) | ||||
Net foreign currency translation adjustments | (182) | (5) | (187) | |||
Net post-retirement benefit obligation | (497) | (497) | ||||
Inclusion of Benfield's noncontrolling interests | 61 | 61 | ||||
Capital contribution by noncontrolling interests | 2 | 2 | ||||
Dividends paid to noncontrolling interests on subsidiary common stock | (9) | (9) | ||||
Total Comprehensive Income | 737 | |||||
Balance at Dec. 31, 2008 | 3,582 | 6,816 | (3,626) | (1,462) | 105 | 5,415 |
Balance (in shares) at Dec. 31, 2008 | 361.7 | |||||
Increase (Decrease) in Equity | ||||||
Net income | 747 | 45 | 792 | |||
Shares issued - employee benefit plans | 119 | 119 | ||||
Shares issued-employee benefit plans (in shares) | 1 | |||||
Shares purchased | (590) | (590) | ||||
Shares reissued - employee benefit plans | (357) | (63) | 357 | (63) | ||
Tax benefit - employee benefit plans | 25 | 25 | ||||
Stock compensation expense | 209 | 209 | ||||
Dividends to stockholders | (165) | (165) | ||||
Change in net derivative gains/losses | 13 | 13 | ||||
Change in net unrealized investment gains/losses | (12) | (12) | ||||
Net foreign currency translation adjustments | 199 | 4 | 203 | |||
Net post-retirement benefit obligation | (413) | (413) | ||||
Purchase of subsidiary shares from noncontrolling interests | (3) | (3) | ||||
Capital contribution by noncontrolling interests | 35 | 35 | ||||
Deconsolidation of noncontrolling interests | (102) | (102) | ||||
Dividends paid to noncontrolling interests on subsidiary common stock | (32) | (32) | ||||
Total Comprehensive Income | 583 | |||||
Balance at Dec. 31, 2009 | $3,578 | $7,335 | ($3,859) | ($1,675) | $52 | $5,431 |
Balance (in shares) at Dec. 31, 2009 | 362.7 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (USD $) | |||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net income | $792 | $1,478 | $877 |
Adjustments to reconcile net income to cash provided by operating activities: | |||
Gains from sales of businesses, net | (91) | (1,208) | (30) |
Depreciation and amortization | 242 | 222 | 205 |
Stock compensation expense | 209 | 248 | 204 |
Deferred income taxes | 138 | (139) | 110 |
Change in assets and liabilities: | |||
Change in funds held on behalf of clients | (90) | 525 | 50 |
Receivables, net | (63) | (151) | 53 |
Accounts payable and accrued liabilities | (54) | (11) | (116) |
Restructuring reserves | 67 | 62 | (47) |
Current income taxes | (105) | 55 | 131 |
Pension and other post employment liabilities | (404) | (105) | (107) |
Other assets and liabilities | (266) | (17) | (67) |
CASH PROVIDED BY OPERATING ACTIVITIES | 375 | 959 | 1,263 |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Sales of long-term investments | 73 | 254 | 1,030 |
Purchase of long-term investments | (158) | (338) | (1,011) |
Net sales (purchases) of short-term investments - non-fiduciary | 259 | 392 | (64) |
Net sales (purchases) of short-term investments - funds held on behalf of clients | 90 | (525) | (50) |
Acquisition of businesses, net of cash acquired | (274) | (1,096) | (251) |
Proceeds from sale of businesses | 11 | 2,820 | 53 |
Capital expenditures | (140) | (103) | (170) |
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES | (139) | 1,404 | (463) |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Issuance of common stock | 51 | 62 | 54 |
Treasury stock transactions, net | (478) | (1,740) | (523) |
Issuance of long-term debt | 684 | 376 | 806 |
Repayment of debt | (709) | (762) | (714) |
Cash dividends to stockholders | (165) | (171) | (176) |
CASH USED FOR FINANCING ACTIVITIES | (617) | (2,235) | (553) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 16 | (130) | 56 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (365) | (2) | 303 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 582 | 584 | 281 |
CASH AND CASH EQUIVALENTS AT END OF YEAR | 217 | 582 | 584 |
Supplemental disclosures: | |||
Interest paid | 103 | 125 | 147 |
Income taxes paid, net of refunds | $182 | $696 | $195 |
Basis of Presentation
Basis of Presentation | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Basis of Presentation | 1.Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S.GAAP"). The consolidated financial statements include the accounts of Aon Corporation and its majority-owned subsidiaries and variable interest entities ("VIEs") for which Aon is considered to be the primary beneficiary ("Aon" or the "Company"). The consolidated financial statements exclude special-purpose entities ("SPEs") considered VIEs for which Aon is not the primary beneficiary. All material intercompany accounts and transactions have been eliminated. Management has reviewed all material subsequent events through February26, 2010, the date the financial statements were issued, to determine whether any event required either recognition or disclosure in the financial statements. Reclassifications Certain amounts in prior years' consolidated financial statements and related notes have been reclassified to conform to the 2009 presentation, including the reclassification of income earned on non-fiduciary operating funds to Interest income from Investment income, a component of Total revenue, and the reclassification of equity earnings on investments to Other income (expense) from Commissions, fees and other revenue in the Consolidated Statements of Income. Following these reclassifications, Total revenue decreased by $103million and $125million in 2008 and 2007, respectively, Other general expenses increased by $1million in 2008 and decreased $2million in 2007, Other income (expense) increased by $10million and $23million in 2008 and 2007, respectively, and Interest income increased by $94million and $100million for 2008 and 2007, respectively. Use of Estimates The preparation of the accompanying consolidated financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of reserves and expenses. These estimates and assumptions are based on management's best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, and foreign currency movements have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. |
Summary of Significant Accounti
Summary of Significant Accounting Principles and Practices | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Summary of Significant Accounting Principles and Practices | 2.Summary of Significant Accounting Principles and Practices Revenue Recognition Risk and Insurance Brokerage Services segment revenues include insurance commissions and fees for services rendered and investment income on funds held on behalf of clients. Revenues are recognized when they are realized or realizable. The Company considers revenues to be realized or realizable when there is persuasive evidence of an arrangement with a client, there is a fixed and determinable price, services have been rendered, and collectability is reasonably assured. For brokerage commissions, revenue is typically considered to be realized or realizable at the completion of the placement process, which generally occurs at the later of the effective date of the policy or when the client is billed. Commission revenues are recorded net of allowances for estimated policy cancellations, which are determined based on an evaluation of historical and current cancellation data. Commissions on premiums billed directly by insurance carriers are recognized as revenue when the Company has sufficient information to determine the amount that it is owed, which may not occur until cash is received from the insurance carrier. In instances when commissions relate to policy premiums that are billed in installments, revenue is recognized when the Company has sufficient information to determine the appropriate billing and the associated commission. Fees for services provided to clients are recognized ratably over the period that the services are rendered. Consulting segment revenues consist primarily of fees paid by clients for consulting advice, commissions from insurance carriers for the placement of individual and group contracts, and outsourcing contracts. Commissions from insurance companies are recognized in the same manner as the Risk and Insurance Brokerage Services segment. Fees paid by clients are typically charged on an hourly, project or fixed fee basis. Revenues from time-and-materials or cost-plus arrangements are recognized as services are performed, which is measured by the amount of time incurred. Revenues from fixed-fee contracts are recognized ratably over the term of the contract. Reimbursements received for out-of-pocket expenses are recorded as a component of revenues. Investment income is recognized as it is earned. Stock Compensation Costs The Company recognizes compensation expense for all share-based payments to employees, including grants of employee stock options and restricted stock and restricted stock units ("RSUs"), as well as employee stock purchases related to the Employee Stock Purchase Plan, based on estimated fair value. Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest during the period. Because stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Retirement Benefits The Company |
Discontinued Operations
Discontinued Operations | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Discontinued Operations | 3.Discontinued Operations Property and Casualty Operations In January 2009, the Company signed a definitive agreement to sell FFG Insurance Company ("FFG"), Atlanta International Insurance Company ("AIIC") and Citadel Insurance Company ("Citadel") (together the "PC operations"). FFG and Citadel were property and casualty insurance operations that were in runoff. AIIC was a property and casualty insurance operation that was previously reported in discontinued operations. The sale was completed in August 2009. A pretax loss totaling $196million was recognized, of which $5million was recorded in 2009 and $191million in 2008. As part of the sale, the purchaser also assumed an indemnification in respect to certain reinsured property and casualty balances. The fair value of this indemnification was $9million at December31, 2008. AIS Management Corporation In 2008, Aon reached a definitive agreement to sell AIS Management Corporation ("AIS"), which was previously included in the Risk and Insurance Brokerage Services segment, to Mercury General Corporation, for $120million in cash at closing, plus a potential earn-out of up to $35million payable over the two years following the completion of the agreement. The disposition was completed in January 2009 and resulted in a pretax gain of $86million. As of February26, 2010, Aon had not received any of this potential earn-out. Accident, Life Health Operations In April 2008, the Company sold its Combined Insurance Company of America ("CICA") subsidiary to ACE Limited and its Sterling Life Insurance Company ("Sterling") subsidiary to Munich Re Group. These two subsidiaries were previously included in the Company's former Insurance Underwriting segment. After final adjustments, Aon received $2.525billion in cash for CICA and $341million in cash for Sterling. Additionally, CICA paid a $325million dividend to Aon before the sale transaction was completed. A pretax gain of $1.4billion was recognized on the sale of these businesses, which included the reversal of the cumulative translation adjustment account (related to selling CICA's foreign entities) of $134million. In 2009, the Company recognized a $55million foreign tax credit carryback related to the sale of CICA. The operating results of all these businesses are classified as discontinued operations, and prior years' operating results have been reclassified as discontinued operations, as follows (in millions): Years ended December31 2009 2008 2007 Revenues: CICA and Sterling $ $ 677 $ 2,502 AIS 92 102 PC Operations 6 10 Total revenues $ $ 775 $ 2,614 Income (loss) before income taxes: Operations: CICA and Sterling $ $ 66 $ 323 AIS (10 ) 25 PC Operations 5 (11 ) Other 3 5 56 340 Gain (loss) on sale: CICA and Sterling 12 1,403 AIS 86 PC Operations (5 ) (191 ) Other (15 ) (12 ) (10 ) |
Other Financial Data
Other Financial Data | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Other Financial Data | 4.Other Financial Data Statement of Income Information Other Income (Expense) Other income (expense) consists of the following (in millions): Years ended December31 2009 2008 2007 Equity income of non-consolidated subsidiaries $ 4 $ 8 $ 6 Realized gain (loss) on sale of investments (1 ) 1 13 Benfield transaction hedging losses (50 ) Gains on disposal of businesses, net 13 8 40 Other 4 4 (1 ) $ 20 $ (29 ) $ 58 Statement of Financial Position Information Fixed Assets, net The components of fixed assets, net are as follows (in millions): As of December31 2009 2008 Software $ 514 $ 485 Leasehold improvements 366 358 Furniture, fixtures and equipment 258 254 Computer equipment 225 222 Land and buildings 78 76 Automobiles and aircraft 40 39 Capital in progress 8 4 1,489 1,438 Less: Accumulated depreciation 1,028 987 Fixed assets, net $ 461 $ 451 Depreciation expense, which includes software amortization, was $149million, $157million and $154million for the years ended December31, 2009, 2008, and 2007, respectively. |
Acquisitions and Dispositions
Acquisitions and Dispositions | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Acquisitions and Dispositions | 5.Acquisitions and Dispositions In 2009, the Company completed the acquisitions of Allied North America, FCC Global Insurance Services and Carpenter Moore Insurance Services which are included in the Risk and Insurance Brokerage Services segment. The following table includes the aggregate amount paid and the preliminary allocation value of intangible assets recorded as a result of these and the other acquisitions made during 2009, 2008 and 2007. Due to the timing of these acquisitions, the Company is in the process of obtaining third-party valuations for the intangible assets other than goodwill that were acquired in 2009, and therefore the allocation of the purchase prices is still subject to refinement. (millions) Years ended December31 2009 2008 2007 Cash paid: Other acquisitions $ 274 $ 105 $ 251 Benfield 1,313 Total $ 274 $ 1,418 $ 251 Intangible assets: Goodwill Other acquisitions $ 185 $ 28 $ 149 Benfield 1,064 Other intangible assets Other acquisitions 73 84 92 Benfield 583 Total $ 258 $ 1,759 $ 241 Internal funds and short-term borrowings financed these acquisitions. The results of operations of these acquisitions are included in the consolidated financial statements from the dates they were acquired. These acquisitions, except for Benfield, would not produce a materially different result if they had been reported from the beginning of the period. Benfield In November 2008, Aon completed the acquisition of the shares of Benfield, a leading independent reinsurance intermediary, with more than 50 locations worldwide. The Company purchased all of the outstanding shares of common and preferred stock of Benfield for $1,281million in cash. The total cost of the acquisition also included direct costs of the transaction totaling $32million. Benfield is known for its client service, analytic capability and innovation. The results of Benfield's operations were included in the Company's consolidated financial statements from the date of closing. In connection with the acquisition, the Company recorded net tangible assets, goodwill and other intangibles which are reported within the Risk and Insurance Brokerage Services segment. None of the goodwill is deductible for tax purposes. Of the acquired intangible assets, $128million was assigned to registered trademarks, which were determined to have indefinite useful lives. Of the remaining balance of intangible assets acquired, $449million was assigned to customer relationships, and $2million was assigned to non-competition agreements, which are being amortized over weighted average useful lives of 12 and 1years, respectively. The following unaudited pro forma consolidated results of operations assume that the merger of Benfield was completed as of January1 for each of the fiscal years shown below (in millions, except per share amounts): 2008 2007 Revenue $ 8,180 $ 7,869 Income from continuing |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Goodwill and Other Intangible Assets | 6.Goodwill and Other Intangible Assets The changes in the net carrying amount of goodwill by operating segment for the years ended December31, 2009 and 2008, respectively, are as follows (in millions): Risk and Insurance Brokerage Services Consulting Total Balance as of January1, 2008 $ 4,527 $ 388 $ 4,915 Goodwill related to acquisitions 1,099 1 1,100 Goodwill related to disposals (5 ) (5 ) Foreign currency revaluation (362 ) (11 ) (373 ) Balance as of December31, 2008 5,259 378 5,637 Goodwill related to acquisitions 191 191 Benfield adjustments 9 9 Goodwill related to disposals (16 ) (16 ) Foreign currency revaluation 250 7 257 Balance as of December31, 2009 $ 5,693 $ 385 $ 6,078 In 2009, the Company finalized the Benfield purchase price allocation, adjusting goodwill principally for the completion of third party valuation reports, the impact of changes in actual employee severance costs compared to original estimates and the resolution of certain tax matters. Other intangible assets by asset class are as follows (in millions): As of December31 2009 2008 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Trademarks $ 136 $ $ 128 $ Customer Related and Contract Based 757 234 697 180 Marketing, Technology and Other 376 244 331 197 $ 1,269 $ 478 $ 1,156 $ 377 Amortization expense on intangible assets was $93million, $65million and $42million for the years ended December31, 2009, 2008 and 2007, respectively. The estimated future amortization for intangible assets as of December31, 2009 is as follows (in millions): 2010 $ 104 2011 99 2012 87 2013 79 2014 68 Thereafter 218 $ 655 |
Restructuring
Restructuring | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Restructuring | 7.Restructuring Aon Benfield Restructuring Plan The Company announced a global restructuring plan ("Aon Benfield Plan") in conjunction with its acquisition of Benfield in 2008. The restructuring plan is intended to integrate and streamline operations across the combined Aon Benfield organization. The Aon Benfield Plan includes an estimated 700 job eliminations. Additionally, duplicate space and assets will be abandoned. The Company originally estimated that this plan would result in cumulative costs totaling approximately $185million over a three-year period, of which $104million was recorded as part of the Benfield purchase price allocation and $81million of which was expected to result in future charges to earnings. During 2009, the Company reduced the Benfield purchase price allocation by $49million to reflect actual severance costs being lower than originally estimated. The Company currently estimates the Plan will result in cumulative costs totaling approximately $155million, of which $55million was recorded as part of the purchase price allocation, $55million has been recorded in earnings during 2009, and an estimated additional $45million will be recorded in future earnings. As of December31, 2009, approximately 530 jobs have been eliminated under this Plan. Total payments of $67million have been made under this Plan to date. All costs associated with the Aon Benfield Plan are included in the Risk and Insurance Brokerage Services segment. Charges related to the restructuring are included in Compensation and benefits and Other general expenses in the accompanying Consolidated Statements of Income. The Company expects these restructuring activities and related expenses to affect continuing operations into 2011. The following summarizes the restructuring and related costs by type that have been incurred and are estimated to be incurred through the end of the restructuring initiative related to the Aon Benfield Plan (in millions): Actual Purchase Price Allocation 2009 Total to Date Estimated Total Cost for Restructuring Period(1) Workforce reduction $ 32 $ 38 $ 70 $ 98 Lease consolidation 22 14 36 49 Asset impairments 2 2 5 Other costs associated with restructuring(2) 1 1 2 3 Total restructuring and related expenses $ 55 $ 55 $ 110 $ 155 (1) Actual costs, when incurred, will vary due to changes in the assumptions built into this plan. Significant assumptions likely to change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives. (2) Other costs associated with restructuring initiatives, including moving costs and consulting and legal fees, are recognized when incurred. 2007 Restructuring Plan In 2007, the Company announced a global restructuring plan intended to create a more streamlined organization and reduce future expense |
Investments
Investments | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Investments | 8.Investments The Company earns income on cash balances and investments, as well as on premium trust balances that Aon maintains for premiums collected from insureds but not yet remitted to insurance companies. Premium trust balances and a corresponding liability are included in fiduciary assets and fiduciary liabilities in the accompanying Consolidated Statements of Financial Position. The Company's interest-bearing assets are included in the following categories in the Consolidated Statements of Financial Position (in millions): As of December31 2009 2008 Cash and cash equivalents $ 217 $ 582 Short-term investments 422 684 Fiduciary assets 3,329 3,178 Investments 319 332 $ 4,287 $ 4,776 The Company's investments are as follows (in millions): As of December31 2009 2008 Equity method investments $ 113 $ 84 PEPSI preferred stock 87 101 Cost method investments 54 114 Other investments 49 13 Fixed-maturity securities 16 20 $ 319 $ 332 PEPSI Preferred Stock In 2001, Aon sold the vast majority of its limited partnership (LP) portfolio, valued at $450million, to PEPSI, a QSPE. The common stock interest in PEPSI is held by a limited liability company which is owned by Aon (49%) and by a charitable trust, which is not controlled by Aon (51%). Aon does not include the assets and liabilities or operations of PEPSI in its consolidated financial statements. Approximately $171million of investment grade fixed-maturity securities were sold by PEPSI to unaffiliated third parties. PEPSI then paid Aon $171million in cash and issued to Aon an additional $279million in fixed-maturity and preferred stock securities. As part of this transaction, Aon is required to purchase from PEPSI additional securities equal to the unfunded limited partnership commitments, as they are requested. These securities are rated below investment grade. Aon did not fund any commitments in 2009, but funded $2million in 2008. As of December31, 2009, the unfunded commitments were $42million. The commitments have specific expiration dates and the partners may decide not to draw on these commitments. Prior to 2007, income distributions received from PEPSI were limited to interest payments on PEPSI debt instruments. Beginning in 2007, PEPSI had redeemed or collateralized all of its debt, and began to pay preferred income distributions to Aon. Whether Aon receives additional preferred returns will depend on the performance of the underlying limited partnership interests, which is expected to vary from period to period. Aon does not control the timing of the distribution. In 2009, 2008, and 2007, Aon received $6million, $32million and $61million, respectively, of income distributions from PEPSI, which are included in Interest income. The estimated fair value of Aon's preferred stock investments in PEPSI is derived primarily from valuations received for the general partners of the LP interests held by PEPSI. |
Debt
Debt | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Debt | 9.Debt The following is a summary of outstanding debt (in millions): As of December31 2009 2008 6.25% EUR 500 debt securities due July 2014, including $4 fair value hedge $ 725 $ 8.205% junior subordinated deferrable interest debentures due January 2027 687 726 5.05% CAD 375 debt securities due April 2011 357 307 7.375% debt securities due December 2012 224 224 Euro credit facility 605 Notes payable, due in varying installments, with interest at 1% to 11.5% 11 13 GlobeRe term loans, with interest at 4% to 12.5% 100 Other 4 2 Total debt 2,008 1,977 Less short-term and current portion of long-term debt 10 105 Total long-term debt $ 1,998 $ 1,872 On July1, 2009, an indirect wholly-owned subsidiary of Aon issued 500million ($721million at December31, 2009 exchange rates) of 6.25% senior unsecured debentures due on July1, 2014. The payment of the principal and interest on the debentures is unconditionally and irrevocably guaranteed by Aon. Proceeds from the offering were used to repay the Company's $677million outstanding indebtedness under its Euro credit facility. In 1997, Aon created Aon CapitalA, a wholly-owned statutory business trust ("Trust"), for the purpose of issuing mandatorily redeemable preferred capital securities ("Capital Securities"). Aon received cash and an investment in 100% of the common equity of Aon CapitalA by issuing 8.205% Junior Subordinated Deferrable Interest Debentures (the "Debentures") to Aon CapitalA. These transactions were structured such that the net cash flows from Aon to Aon CapitalA matched the cash flows from Aon CapitalA to the third party investors. Aon determined that it was not the primary beneficiary of Aon CapitalA, a VIE, and, thus reflected the Debentures as long-term debt. During the first half of 2009, Aon repurchased $15million face value of the Capital Securities for approximately $10million, resulting in a $5million gain, which was reported in Other income (expense) in the Consolidated Statement of Income. To facilitate the legal release of the obligation created through the Debentures associated with this repurchase and future repurchases, Aon dissolved the Trust effective June25, 2009. This dissolution resulted in the exchange of the Capital Securities held by third parties for the Debentures. Also in connection with the dissolution of the Trust, the $24million of common equity of Aon CapitalA held by Aon was exchanged for $24million of Debentures, which were then cancelled. Following these actions, $687million of Debentures remain outstanding. The Debentures are subject to mandatory redemption on January1, 2027 or are redeemable in whole, but not in part, at the option of Aon upon the occurrence of certain events. Certain of Aon's European subsidiaries have a 650million ($937million at December31, 2009 exchange rates) multi-currency revolving loan credit facility. This facility will mature in October 2010. Commitment fees of 8.75 basis points are payable on the unused portion of the facility. At December31, 2009, Aon had no borrowing |
Lease Commitments
Lease Commitments | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Lease Commitments | 10.Lease Commitments Aon leases office facilities, equipment and automobiles under noncancelable operating leases. These leases expire at various dates and may contain renewal and expansion options. In addition to base rental costs, occupancy lease agreements generally provide for rent escalations resulting from increased assessments for real estate taxes and other charges. Approximately 88% of Aon's lease obligations are for the use of office space. Rental expenses for operating leases are as follows (in millions): Years ended December31 2009 2008 2007 Rental expense $ 346 $ 363 $ 408 Sub lease rental income 52 55 40 Net rental expense $ 294 $ 308 $ 368 At December31, 2009, future minimum rental payments required under operating leases for continuing operations that have initial or remaining noncancelable lease terms in excess of one year, net of sublease rental income, most of which pertain to real estate leases, are as follows (in millions): 2010 $ 302 2011 281 2012 266 2013 242 2014 201 Thereafter 525 Total minimum payments required $ 1,817 |
Income Taxes
Income Taxes | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Income Taxes | 11.Income Taxes Aon and its principal domestic subsidiaries are included in a consolidated federal income tax return. Aon's international subsidiaries file various income tax returns in their jurisdictions. Income from continuing operations before income taxes and the provision for income tax consist of the following (in millions): Years ended December31 2009 2008 2007 Income from continuing operations before income taxes: U.S. $ 215 $ 129 $ 215 International 734 750 808 Total $ 949 $ 879 $ 1,023 Income taxes: Current: U.S. federal $ 32 $ 44 $ 61 U.S. state and local 23 21 15 International 150 210 207 Total current 205 275 283 Deferred (credit): U.S. federal 49 (15 ) (1 ) U.S. state and local 5 (2 ) 1 International 9 (16 ) 65 Total deferred 63 (33 ) 65 $ 268 $ 242 $ 348 Income from continuing operations before income taxes shown above is based on the location of the business unit to which such earnings are attributable. However, because such earnings in some cases may be subject to taxation in more than one country, the income tax provision shown above as U.S. or International may not correspond to the geographic attribution of the earnings. A reconciliation of the income tax provisions based on the U.S. statutory corporate tax rate to the provisions reflected in the Consolidated Financial Statements is as follows: Years ended December31 2009 2008 2007 Statutory tax rate 35.0 % 35.0 % 35.0 % State income taxes, net of federal benefit 2.0 1.4 1.0 Taxes on international operations (12.0 ) (14.2 ) (5.3 ) Nondeductible expenses 3.4 4.2 2.3 Adjustments to prior year tax requirements 0.1 0.4 (0.9 ) Deferred tax adjustments, including statutory rate changes 0.1 0.2 1.3 Other net (0.4 ) 0.5 0.6 Effective tax rate 28.2 % 27.5 % 34.0 % The components of Aon's deferred tax assets and liabilities are as follows (in millions): As of December31 2009 2008 Deferred tax assets: Employee benefit plans $ 934 $ 842 Net operating loss and tax credit carryforwards 314 145 Other accrued expenses 132 230 Investment basis differences 44 62 Other 36 33 1,460 1,312 Valuation allowance on deferred tax assets (186 ) (39 ) Total 1,274 1,273 Deferred tax liabilities: Intangibles (360 ) (381 ) Deferred revenue (34 ) (40 ) Other accrued expenses (32 ) (27 ) Unrealized investment gains (26 ) (27 ) Unrealized foreign exchange gains (12 ) (15 ) Other (2 ) (10 ) Total (466 ) (500 ) Net deferred tax asset $ 808 $ 773 Deferred income taxes (assets and liabilities have been nett |
Stockholders' Equity
Stockholders' Equity | |
1/1/2009 - 12/31/2009
USD / shares | |
Notes to Consolidated Financial Statements | |
Stockholders' Equity | 12.Stockholders' Equity Common Stock Aon's Board of Directors has authorized the Company to repurchase up to $4.6billion of its outstanding common stock. Shares may be repurchased through the open market or in privately negotiated transactions from time to time, based on prevailing market conditions, and will be funded from available capital. Any repurchased shares will be available for employee stock plans and for other corporate purposes. In 2009, Aon repurchased 15.1million shares at a cost of $590million. In 2008, Aon repurchased 42.6million shares at a cost of $1.9billion. In 2007, Aon repurchased 19.1million shares at a cost of $751million. Since inception of its share repurchase program in 2005, the Company has repurchased a total of 105.8million shares for an aggregate cost of $4.3billion. As of December31, 2009, the Company was authorized to purchase up to $265million of additional shares under the current stock repurchase program. The timing and amount of future purchases will be based on market and other conditions. In January 2010, the Company's Board of Directors authorized a new share repurchase program under which up to $2billion of common stock may be repurchased from time to time depending on market conditions or other factors through open market or privately negotiated transactions. Repurchases will commence under the new share repurchase program upon conclusion of the existing program. In connection with the acquisition of two entities controlled by Aon's then-Chairman and Chief Executive Officer in 2001, Aon obtained approximately 22.4million shares of its common stock. These treasury shares are restricted as to their reissuance. In 2009, Aon issued 1.0million new shares of common stock for employee benefit plans. In addition, Aon reissued 8.0million shares of treasury stock for employee benefit programs and 0.5million shares in connection with employee stock purchase plans. In 2008, Aon issued 0.4million new shares of common stock for employee benefit plans. In addition, Aon reissued 9.1million shares of treasury stock for employee benefit programs and 0.3million shares in connection with employee stock purchase plans. In 2007, Aon issued 0.4million new shares of common stock for employee benefit plans and 0.1million shares in connection with employee stock purchase plans. In addition, Aon reissued 9.3million shares of treasury stock for employee benefit programs and 0.3million shares in connection with employee stock purchase plans. Dividends During 2009, 2008, and 2007, Aon paid dividends on its common stock of $165million, $171million, and $176million, respectively. Dividends paid per common share were $0.60 for each of the years ended December31, 2009, 2008 and 2007. Other Comprehensive Income (Loss) The components of other comprehensive income (loss) and the related tax effects are as follows (in millions): Year ended December31, 2009 Pretax Income Tax Benefit (Expense) Net of Tax Net derivative gains arising during the year $ 11 $ (4 ) $ 7 Reclassification adjustment 10 (4 ) 6 Net change in derivative gains 21 (8 ) 13 |
Employee Benefits
Employee Benefits | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Employee Benefits | 13.Employee Benefits Defined Contribution Savings Plans Aon maintains defined contribution savings plans for the benefit of its U.S. and U.K. employees. The expense recognized for these plans, which is included in Compensation and benefits and Discontinued operations in the Consolidated Statements of Income, is as follows (in millions): Years ended December 31 2009 2008 2007 U.S. $ 56 $ 37 $ 49 U.K. 38 40 37 $ 94 $ 77 $ 86 Pension and Other Post-retirement Benefits Aon sponsors defined benefit pension and post-retirement health and welfare plans that provide retirement, medical, and life insurance benefits. The post-retirement healthcare plans are contributory, with retiree contributions adjusted annually; the life insurance and pension plans are noncontributory. The Company's U.S., U.K., and Canadian plans are closed to new entrants. Effective January1, 2009, the Company's Netherlands plan was also closed to new entrants. Effective April1, 2009, the Company ceased crediting future benefits relating to salary and service in its U.S. defined benefit pension plan. This change affected approximately 6,000 active employees covered by the U.S. plan. For those employees, the Company increased its contribution to the defined contribution savings plan. In 2010 and 2011, the Company will cease crediting future benefits relating to service in its Canadian defined benefit pension plans. This change will affect approximately 950 active employees. Pension Plans The following tables provide a reconciliation of the changes in the benefit obligations and fair value of assets for the years ended December31, 2009 and 2008 and a statement of the funded status as of December31, 2009 and 2008, for the U.S. plans and material international plans, which are located in the U.K., the Netherlands, and Canada. These plans represent approximately 95% of the Company's pension obligations. U.S. International (millions) 2009 2008 2009 2008 Change in projected benefit obligation At January1 $ 2,087 $ 1,677 $ 3,628 $ 5,298 Service cost 39 18 23 Interest cost 125 107 236 279 Participant contributions 2 2 Curtailment (15 ) Plan transfer 7 6 (52 ) Actuarial loss (gain) 18 176 166 (161 ) Benefit payments (102 ) (84 ) (201 ) (172 ) Change in discount rate 26 165 298 (412 ) Foreign currency translation 347 (1,177 ) At December31 $ 2,139 $ 2,087 $ 4,500 $ 3,628 Accumulated benefit obligation at end of year $ 2,139 $ 2,080 $ 4,442 $ 3,577 Change in fair value of plan assets At January1 $ 1,087 $ 1,514 $ 3,107 $ 4,478 Actual return on plan assets 144 (358 ) 137 (317 ) Participant contributions 2 2 Employer contributions 24 9 413 168 Plan transfer 6 4 (65 ) Benefit payments (102 ) (84 ) |
Stock Compensation Plans
Stock Compensation Plans | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Stock Compensation Plans | 14.Stock Compensation Plans The following table summarizes stock-based compensation expense recognized in continuing operations in the Consolidated Statements of Income in Compensation and benefits (in millions): Years ended December31 2009 2008 2007 RSUs $ 124 $ 132 $ 109 Performance plans 60 67 54 Stock options 21 24 22 Employee stock purchase plans 4 3 3 Total stock-based compensation expense 209 226 188 Tax benefit 68 82 64 Stock-based compensation expense, net of tax $ 141 $ 144 $ 124 During 2009, the Company converted its stock administration system to a new service provider. In connection with this conversion, a reconciliation of the methodologies and estimates utilized was performed, which resulted in a $12million reduction of expense for the year ended December31, 2009. Stock Awards Stock awards, in the form of RSUs, are granted to certain employees and consist of both performance-based and service-based RSUs. Service-based awards generally vest between three and ten years from the date of grant. The fair value of service-based awards is based upon the market price of the underlying common stock at the date of grant. With certain limited exceptions, any break in continuous employment will cause the forfeiture of all unvested awards. Compensation expense associated with stock awards is recognized over the service period using the straight-line method. Dividend equivalents are paid on certain service-based RSUs, based on the initial grant amount. At December31, 2009, 2008 and 2007, the number of shares available for stock awards is included with options available for grant. Performance-based RSUs have been granted to certain employees. Vesting of these awards is contingent upon meeting various individual, divisional or company-wide performance conditions, including revenue generation or growth in revenue, pretax income or earnings per share over a one- to five-year period. The performance conditions are not considered in the determination of the grant date fair value for these awards. The fair value of performance-based awards is based upon the market price of the underlying common stock at the date of grant. Compensation expense is recognized over the performance period, and in certain cases an additional vesting period, based on management's estimate of the number of units expected to vest. Compensation expense is adjusted to reflect the actual number of shares paid out at the end of the programs. The payout of shares under these performance-based plans may range from 0-200% of the number of units granted, based on the plan. Dividend equivalents are generally not paid on the performance-based RSUs. During 2009, the Company granted approximately 2million shares in connection with the completion of the 2006 Leadership Performance Plan ("LPP") cycle. During 2009, 2008 and 2007, the Company granted approximately 3.7million, 4.2million and 4.3million restricted shares, respectively, in connection with the Company's incentive compensation plans. A summary of the status of Aon's non |
Derivatives and Hedging
Derivatives and Hedging | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Derivatives and Hedging | 15.Derivatives and Hedging Aon is exposed to market risk primarily from changes in foreign currency exchange rates and interest rates. To manage the risk related to these exposures, Aon enters into various derivative transactions that reduce Aon's market risks by creating offsetting market exposures. Aon does not enter into derivative transactions for trading purposes. Derivative transactions are governed by a uniform set of policies and procedures covering areas such as authorization, counterparty exposure and hedging practices. Positions are monitored using techniques such as market value and sensitivity analyses. Certain derivatives also give rise to credit risks from the possible non-performance by counterparties. The credit risk is generally limited to the fair value of those contracts that are favorable to Aon. Aon has limited its credit risk by using International Swaps and Derivatives Association ("ISDA") master agreements, collateral and credit support arrangements, entering into non-exchange-traded derivatives with highly-rated major financial institutions and by using exchange-traded instruments. Aon monitors the credit-worthiness of, and exposure to, its counterparties. As of December31, 2009, all net derivative liability positions were entered into pursuant to terms of ISDA master agreements, and were free of credit risk contingent features. In addition, Aon has received collateral of $14million from counterparties and pledged collateral of $1million to counterparties for derivatives subject to collateral support arrangements as of December31, 2009. Foreign Exchange Risk Management Aon and its subsidiaries are exposed to foreign exchange risk when they receive revenues, pay expenses, or enter into intercompany loans denominated in a currency that differs from their functional currency. Aon uses foreign exchange derivatives, typically forward contracts, options and cross currency swaps, to reduce its overall exposure to the effects of currency fluctuations on cash flows. Aon has hedged these exposures up to six years in the future. Aon has designated foreign exchange derivatives with a notional amount of $2.0billion at December31, 2009 as cash flow hedges of these exposures. As of December31, 2009, a $14million pretax loss has been deferred to OCI related to these hedges, of which a $21million loss is expected to be reclassified to earnings in 2010. These hedges had no material ineffectiveness in 2009, 2008 or 2007. In addition, as of December31, 2009, Aon has $112million notional amount of foreign exchange derivatives not designated or qualifying as cash flow hedges offsetting these exposures. Aon also uses foreign exchange derivatives, typically forward contracts and options, to hedge its net investments in foreign operations for up to four years in the future. As of December31, 2009, the notional amount outstanding was $1.7billion and no gain or loss has been deferred to OCI related to this hedge. This hedge had no ineffectiveness in 2009, 2008 or 2007. Aon also uses foreign exchange derivatives, typically forward contracts and options, with a notional amount of $54million at December31, 2009, to reduce |
Variable Interest Entities
Variable Interest Entities | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Variable Interest Entities | 16.Variable Interest Entities Aon did not consolidate any VIEs at December31, 2009. As of December31, 2008, the following VIEs were consolidated: Juniperus Insurance Opportunity Fund Limited ("Juniperus"), which is an investment vehicle that invests in an actively managed and diversified portfolio of insurance risks, and Juniperus Capital Holdings Limited ("JCHL"), which provides investment management and related services to Juniperus. At December31, 2008, Aon held a majority equity interest in the Juniperus ClassA shares and bore a majority of the expected residual returns and losses. Aon also had a majority voting interest in JCHL and absorbed a majority of JCHL's expected residual returns and losses. Aon was considered the primary beneficiary of both companies, and as such these entities were consolidated. As of December31, 2009, Aon's interests had been reduced to 38% and 39% for Juniperus and JCHL, respectively and Aon was no longer deemed to be the primary beneficiary. Consequently, these entities are no longer consolidated by Aon and prospectively will be accounted for using the equity method of accounting. Juniperus and JCHL had combined assets and liabilities of $121million and $22million, respectively, at December31, 2008. Aon recognized $36million of pretax income from Juniperus and JCHL for the year ended December31, 2009. Aon's potential loss at December31, 2009 is limited to its investment in the VIEs of $73million, which is recorded in investments in the Consolidated Statements of Financial Position at December31, 2009. Aon previously owned the majority economic equity interest in GlobeRe Limited ("GlobeRe"), a VIE which provided reinsurance coverage for a defined portfolio of property catastrophe reinsurance contracts underwritten by a third party for a limited period which ended June1, 2009. Aon consolidated GlobeRe as it was deemed to be the primary beneficiary. In connection with the winding up of its operations, during 2009 GlobeRe repaid its $100million of short-term debt from available cash. Also in 2009, Aon's equity investment in GlobeRe was repaid. Aon recognized $2million of pretax income from GlobeRe in 2009. GlobeRe was fully liquidated in 2009. |
Fair Value and Financial Instru
Fair Value and Financial Instruments | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Fair Value and Financial Instruments | 17.Fair Value and Financial Instruments Accounting standards establish a three tier fair value hierarchy which prioritizes the inputs used in measuring fair values as follows: Level1 observable inputs such as quoted prices for identical assets in active markets; Level2 inputs other than quoted prices for identical assets in active markets, that are observable either directly or indirectly; and Level3 unobservable inputs in which there is little or no market data which requires the use of valuation techniques and the development of assumptions. At December31, 2009, Aon's Level3 fair value measurements primarily consists of its PEPSI investment and guarantees. The following methods and assumptions are used to estimate the fair values of the Company's financial instruments: Money market funds and highly liquid debt securities are carried at cost and amortized cost, respectively, as an approximation of fair value. Based on market convention, the Company considers cost a practical and expedient measure of fair value. Other investments carried at fair value consists primarily of the Company's investment in PEPSI. Fair value is based on valuations received from the general partners of the limited partnership interests held by PEPSI. Derivatives are carried at fair value, based upon industry standard valuation techniques that use, where possible, current market-based or independently sourced pricing inputs, such as interest rates, currency exchange rates, or implied volatilities. Retained interests in the sold premium finance agreements of Aon's premium financing operations were recorded at fair value by discounting estimated future cash flows using discount rates that are commensurate with the underlying risk, expected future prepayment rates, and credit loss estimates. Guarantees are carried at fair value, which is based on discounted estimated future cash flows using published historical cumulative default rates and discount rates commensurate with the underlying exposure. Debt is carried at outstanding principal balance. Fair value is based on quoted market prices or estimates using discounted cash flow analyses based on current borrowing rates for similar types of borrowing arrangements. The following tables present the categorization of the Company's assets and liabilities that are measured at fair value on a recurring basis at December31, 2009 and 2008 (in millions): Fair Value Measurements Using Balance at December31, 2009 Quoted Prices in Active Markets for Identical Assets (Level1) Significant Other Observable Inputs (Level2) Significant Unobservable Inputs (Level3) Assets: Money market funds and highly liquid debt securities(1) $ 2,086 $ 2,058 $ 28 $ Other investments 103 3 100 Derivatives 141 141 Liabilities: Derivatives 74 74 Guarantees 4 4 (1) Includes $2,058million of money market funds and $28million of highly liquid debt securities that are classified as fiduciary assets, short-term investments or cash e |
Commitments and Contingencies
Commitments and Contingencies | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Commitments and Contingencies | 18.Commitments and Contingencies Legal Aon and its subsidiaries are subject to numerous claims, tax assessments, lawsuits and proceedings that arise in the ordinary course of business, which frequently include errors and omissions ("EO") claims. The damages claimed in these matters are or may be substantial, including, in many instances, claims for punitive, treble or extraordinary damages. Aon has historically purchased EO insurance and other insurance to provide protection against certain losses that arise in such matters. Aon has exhausted or materially depleted its coverage under some of the policies that protect the Company and, consequently, is self-insured or materially self-insured for some historical claims. Accruals for these exposures, and related insurance receivables, when applicable, have been provided to the extent that losses are deemed probable and are reasonably estimable. These accruals and receivables are adjusted from time to time as developments warrant. Amounts related to settlement provisions are recorded in Other general expenses in the Consolidated Statements of Income. At the time of the 2004-05 investigation of the insurance industry by the Attorney General of New York ("NYAG") and other regulators, purported classes of clients filed civil litigation against Aon and other companies under a variety of legal theories, including state tort, contract, fiduciary duty, antitrust and statutory theories and federal antitrust and Racketeer Influenced and Corrupt Organizations Act ("RICO") theories. The federal actions were consolidated in the U.S. District Court for the District of New Jersey, and a state court collective action was filed in California. In the New Jersey actions, the Court dismissed plaintiffs' federal antitrust and RICO claims in separate orders in August and October 2007, respectively. Plaintiffs have appealed these dismissals. Aon believes it has meritorious defenses in all of these cases and intends to vigorously defend itself against these claims. The outcome of these lawsuits, and any losses or other payments that may occur as a result, cannot be predicted at this time. Also at the time of the NYAG investigation, putative classes filed actions against Aon in the U.S. District Court for the Northern District of Illinois under the federal securities laws and ERISA. Plaintiffs in the federal securities class action originally submitted purported expert reports estimating a range of alleged damages of $353million to $490million, and plaintiffs in the ERISA class actions originally submitted revised purported expert reports estimating a range of alleged damages of $74million to $349million. To protect against the uncertain outcome of litigation and to contain exposure to the Company, Aon settled the securities suit for $30million in 2009 and has reached an agreement in principle to settle the ERISA suit for $1.8million. On November24, 2009, the Court entered a final order approving the settlement and dismissing the securities suit. The proposed ERISA settlement is subject to documentation, notice and court approval. Following inquiries from regulators, the Company commenced an internal re |
Segment Information
Segment Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Segment Information | 19.Segment Information Aon classifies its businesses into two operating segments: Risk and Insurance Brokerage Services and Consulting. Unallocated income and expenses, when combined with the operating segments and after the elimination of intersegment revenues and expenses, total to the amounts in the Consolidated Financial Statements. Operating segments have been determined using a management approach, which is consistent with the basis and manner in which Aon's chief operating decision maker uses financial information for the purposes of allocating resources and evaluating performance. Aon evaluates performance based on stand-alone operating segment operating income and generally accounts for intersegment revenue as if the revenue were from third parties and at what management believes are current market prices. The Risk and Insurance Brokerage Services business acts as an advisor and insurance broker, helping clients manage their risks, as well as negotiating and placing insurance risk with insurance carriers through our global distribution network. The Consulting business provides advice and services to clients related to health and benefits, retirement, compensation, strategic human capital, and human resource outsourcing. Aon's total revenue is as follows (in millions): Years ended December31 2009 2008 2007 Risk and Insurance Brokerage Services $ 6,305 $ 6,197 $ 5,918 Consulting 1,267 1,356 1,345 Intersegment elimination (26 ) (25 ) (29 ) Total operating segments 7,546 7,528 7,234 Unallocated 49 Total revenue $ 7,595 $ 7,528 $ 7,234 Commissions, fees and other revenues by product are as follows (in millions): Years ended December31 2009 2008 2007 Retail brokerage $ 4,747 $ 5,028 $ 4,841 Reinsurance brokerage 1,485 1,001 900 Total Risk and Insurance Brokerage Services Segment 6,232 6,029 5,741 Consulting services 1,075 1,139 1,106 Outsourcing 191 214 236 Total Consulting Segment 1,266 1,353 1,342 Intersegment elimination (26 ) (25 ) (29 ) Unallocated 49 Total commissions, fees and other revenue $ 7,521 $ 7,357 $ 7,054 Fiduciary investment income by segment is as follows (in millions): Years ended December31 2009 2008 2007 Risk and Insurance Brokerage Services $ 73 $ 168 $ 177 Consulting 1 3 3 Total fiduciary investment income $ 74 $ 171 $ 180 Selected information for Aon's operating segments is as follows (in millions): Years ended December31 Risk and Insurance Brokerage Services Consulting 2009 2008 2007 2009 2008 2007 Total revenues(1) $ 6,305 $ 6,197 $ 5,918 $ 1,267 $ 1,356 $ 1,345 Operating income 900 846 954 203 208 180 Total assets 14,570 14,285 12,783 368 379 305 (1) Excludes the elimination of intersegment revenues |
Quarterly Financial Data
Quarterly Financial Data (Unaudited) | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Quarterly Financial Data (Unaudited) | 20.Quarterly Financial Data (Unaudited) Selected quarterly financial data for the years ended December31, 2009 and 2008 are as follows (in millions, except per share data): 1Q(1) 2Q(1) 3Q 4Q 2009 INCOME STATEMENT DATA Commissions, fees and other revenue $ 1,821 $ 1,863 $ 1,778 $ 2,059 $ 7,521 Fiduciary investment income 25 19 16 14 74 Total revenue $ 1,846 $ 1,882 $ 1,794 $ 2,073 $ 7,595 Operating income $ 366 $ 220 $ 194 $ 241 $ 1,021 Income from continuing operations $ 235 $ 153 $ 131 $ 162 $ 681 Income from discontinued operations 50 2 3 56 111 Net income 285 155 134 218 792 Less: Net income attributable to noncontrolling interests 5 6 14 20 45 Net income attributable to Aon stockholders $ 280 $ 149 $ 120 $ 198 $ 747 PER SHARE DATA Basic: Income from continuing operations $ 0.81 $ 0.52 $ 0.41 $ 0.51 $ 2.25 Income from discontinued operations 0.18 0.01 0.20 0.39 Net income $ 0.99 $ 0.52 $ 0.42 $ 0.71 $ 2.64 Diluted: Income from continuing operations $ 0.79 $ 0.50 $ 0.40 $ 0.49 $ 2.19 Income from discontinued operations 0.17 0.01 0.01 0.20 0.38 Net income $ 0.96 $ 0.51 $ 0.41 $ 0.69 $ 2.57 COMMON STOCK DATA Dividends paid per share $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.60 Price range: High $ 46.19 $ 42.50 $ 42.92 $ 42.32 $ 46.19 Low $ 35.78 $ 34.81 $ 36.36 $ 36.81 $ 34.81 Shares outstanding 276.8 274.5 273.9 266.2 266.2 Average monthly trading volume 83.6 85.7 52.8 47.8 67.5 1Q(1) 2Q(1) 3Q 4Q 2008 INCOME STATEMENT DATA Commissions, fees and other revenue $ 1,848 $ 1,887 $ 1,754 $ 1,868 $ 7,357 Fiduciary investment income 45 44 44 38 171 Total revenue $ 1,893 $ 1,931 $ 1,798 $ 1,906 $ 7,528 Operating income $ 275 $ 230 $ 199 $ 236 $ 940 Income from continuing operations $ 182 $ 169 $ 159 $ 127 $ 637 Income (loss) from discontinued operations 41 967 (38 ) (129 ) 841 Net income (loss) 223 1,136 121 (2 ) 1,478 Less: Net income attributable to noncontrolling interests 5 3 4 4 16 Net income (loss) attributable to Aon stockholders $ 218 $ 1,133 $ 117 $ (6 ) $ 1,462 PER SHARE DATA Basic: Income from continuing operations $ 0.57 $ 0.56 $ 0.55 $ 0.44 $ 2.12 Income (loss) from discontinued operations |
Document and Entity Information
Document and Entity Information (USD $) | |||
12 Months Ended
Dec. 31, 2009 | Jan. 29, 2010
| Jun. 30, 2009
| |
Document and Entity Information | |||
Entity Registrant Name | AON CORP | ||
Entity Central Index Key | 0000315293 | ||
Document Type | 10-K | ||
Document Period End Date | 2009-12-31 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $10,364,352,829 | ||
Entity Common Stock, Shares Outstanding | 266,851,500 |