Exhibit 99.1
News from Aon
Aon Reports Fourth Quarter and Full Year 2007 Results
- Revenue increased 8% to $2.0 billion -
- EPS from Continuing Operations increased 37% to $0.59 -
Fourth Quarter 2007 Highlights
· EPS from continuing operations, excluding certain items, increased 17% to $0.69
· Risk and Insurance Brokerage Services pretax margin was 17.0% and the adjusted pretax margin, excluding certain items, increased 100 basis points to 18.5%
· Consulting pretax margin was 16.1% and the adjusted pretax margin, excluding certain items, increased 180 basis points to 17.2%
· Announced definitive agreements to sell Combined Insurance Company of America for $2.4 billion and Sterling Life Insurance for $352 million
· Increased existing authorized share repurchase program by $2.6 billion
CHICAGO, IL — February 7, 2008 - Aon Corporation (NYSE: AOC) today reported results for the fourth quarter and full year ended December 31, 2007.
Net income decreased 7% to $207 million or $0.64 per share, compared to $223 million or $0.67 per share for the prior year quarter. Net income from continuing operations increased 33% to $190 million or $0.59 per share, compared to $143 million or $0.43 per share for the prior year quarter. Certain items that impacted fourth quarter results and comparisons with the prior year quarter are detailed in the reconciliations of non-GAAP measures on pages 11 and 12 of this press release. Net income from continuing operations per share, excluding certain items, increased 17% to $0.69 compared to $0.59 for the prior year quarter.
“We are pleased with our solid fourth quarter results, which reflect the strength of our industry-leading network of global resources and capabilities and continued progress in each of our key operating metrics. Organic revenue growth was two percent in our brokerage segment and three percent in consulting services, adjusted pretax margin increased 110 basis points, and adjusted earnings per share from continuing operations increased 17 percent,” said Greg Case, president and chief executive officer, Aon Corporation.
“Our fourth quarter and 2007 results are fully on schedule with the second year of our three-year improvement plan. Our expense initiatives and restructuring programs are delivering meaningful margin improvement while funding investments in value-added services and capabilities for our clients. We increased our focus on core assets with the announced sale of our lower-margin, more capital-intensive insurance underwriting businesses. Our balance sheet is strong, which provides financial flexibility, and we increased our authorized share repurchase program by $2.6 billion. All these actions support our belief in the underlying strength of Aon and our ongoing commitment to long-term shareholder value creation.”
FOURTH QUARTER FINANCIAL SUMMARY
Total revenue increased 8% to $2.0 billion with organic revenue growth of 1%. Total expenses increased 4% or $73 million to $1.8 billion, including a $92 million unfavorable impact from foreign currency translation.
Pension expense related to the Company’s major defined benefit pension plans declined to $15 million in the fourth quarter compared to $54 million in the prior year quarter. Pension expense declined to $80 million in 2007 compared to $233 million in 2006 due primarily to plan amendments made in the Company’s major defined benefit pension plans. The Company currently anticipates that 2008 pension expense will be similar to 2007.
Restructuring expense was $34 million in the fourth quarter compared to $78 million in the prior year quarter. An analysis of restructuring related expenses by segment and type for the 2005 and 2007 restructuring programs is detailed on page 13 of this release.
Restructuring savings realized in the fourth quarter are estimated at $64 million compared to $37 million in the prior year quarter. Of the estimated restructuring savings in the fourth quarter, $54 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. Cumulative cost savings estimates do not include any benefits related to businesses placed into discontinued operations.
The 2007 restructuring program, before any potential reinvestment of savings, 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 $0.04 per share compared to the prior year quarter.
Effective tax rate on continuing operations was 30.4% for the fourth quarter compared to 26.7% for the prior year quarter. Both quarters were impacted by the resolution of certain items, non-recurring tax adjustments and tax credits. The Company currently anticipates that the effective tax rate on continuing operations will be 33.0% for 2008.
Diluted average shares outstanding declined to 324 million in the fourth quarter compared to 334 million in the prior year quarter, due primarily to the Company’s share repurchase program. During the fourth quarter, the Company repurchased 544,700 shares of common stock for $26 million, at an average price of $47.29 per share.
Discontinued Operations after-tax income was $17 million or $0.05 per share compared to $80 million or $0.24 per share for the prior year quarter. Discontinued operations include the results of Combined Insurance Company of America (CICA) and Sterling Life Insurance (Sterling), as well as the results and dispositions of Aon Warranty Group (AWG) and Construction Program Group (CPG), which were sold in the fourth quarter 2006. CICA’s fourth quarter 2007 results include a $28 million non-recurring tax adjustment related to the recognition of deferred taxes of foreign subsidiaries.
2
FOURTH QUARTER SEGMENT REVIEW
Certain noteworthy items impacted revenue, pretax income and pretax margins in the fourth quarter of 2007 and 2006. The fourth 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” on page 12 of this press release.
RISK AND INSURANCE BROKERAGE SERVICES
| | | | | | | | | | Less: | | | | | |
(millions) | | Fourth Quarter Ended | | | | Less: | | Acquisitions, | | Less: | | Organic | |
| | Dec 31, | | Dec 31, | | % | | Currency | | Divestitures, | | All | | Revenue | |
Revenue | | 2007 | | 2006 | | Change | | Impact | | Transfers | | Other | | Growth | |
Americas | | $ | 686 | | $ | 654 | | 5 | % | 2 | % | — | % | — | % | 3 | % |
U.K. | | 234 | | 206 | | 14 | | 10 | | 1 | | 4 | | (1 | ) |
EMEA | | 359 | | 291 | | 23 | | 12 | | 2 | | 4 | | 5 | |
Asia Pacific | | 145 | | 147 | | (1 | ) | 11 | | (2 | ) | (5 | ) | (5 | ) |
Reinsurance | | 227 | | 224 | | 1 | | 1 | | 1 | | (4 | ) | 3 | |
Total | | $ | 1,651 | | $ | 1,522 | | 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 increased 3% primarily reflecting strong growth in Latin America and Affinity. U.K. organic revenue declined 1% due primarily to soft market conditions. EMEA organic revenue increased 5% due to solid growth in continental Europe and strong growth in emerging markets. Asia Pacific organic revenue decreased 5% reflecting soft market conditions in Australia and the impact of certain regulatory changes in Japan, partially offset by solid growth in most other Asian markets. Reinsurance organic revenue increased 3% due primarily to growth in global facultative placements and capital markets transactions, partially offset by soft market conditions and higher cedant retentions.
| | Fourth Quarter Ended | | | |
(millions) | | Dec 31, | | Dec 31, | | % | |
| | 2007 | | 2006 | | Change | |
Revenue | | $ | 1,651 | | $ | 1,522 | | 8 | % |
Expenses | | | | | | | |
Compensation and benefits | | 932 | | 927 | | 1 | |
Other expenses | | 438 | | 399 | | 10 | |
Total expenses | | 1,370 | | 1,326 | | 3 | |
| | | | | | | |
Pretax income | | $ | 281 | | $ | 196 | | 43 | % |
Pretax margin | | 17.0 | % | 12.9 | % | | |
| | | | | | | |
Pretax income - adjusted | | $ | 305 | | $ | 266 | | 15 | % |
Pretax margin - adjusted | | 18.5 | % | 17.5 | % | | |
Compensation and benefits for the fourth quarter were essentially unchanged from the prior year quarter as a $55 million unfavorable impact from foreign currency translation was offset by lower restructuring costs and benefits related to the 2005 restructuring program.
3
Other expenses increased $39 million or 10% compared to the prior year quarter including a $14 million unfavorable impact from foreign currency translation and higher restructuring costs, partially offset by benefits related to the 2005 restructuring program.
Fourth quarter pretax income increased 43% to $281 million. Adjusting for certain items detailed on page 12 of this press release, pretax income increased 15% to $305 million and pretax margin increased 100 basis points to 18.5% versus the prior year quarter.
CONSULTING
| | | | | | | | | | Less: | | | | | |
(millions) | | Fourth Quarter Ended | | | | Less: | | Acquisitions, | | Less: | | Organic | |
| | Dec 31, | | Dec 31, | | % | | Currency | | Divestitures, | | All | | Revenue | |
Revenue | | 2007 | | 2006 | | Change | | Impact | | Transfers | | Other | | Growth | |
Services | | $ | 314 | | $ | 280 | | 12 | % | 5 | % | 2 | % | 2 | % | 3 | % |
Outsourcing | | 59 | | 84 | | (30 | ) | 3 | | (1 | ) | — | | (32 | ) |
Total | | $ | 373 | | $ | 364 | | 2 | % | 5 | % | 2 | % | — | % | (5 | )% |
Consulting revenue increased 2% to $373 million compared to the prior year quarter. Organic revenue in Consulting Services increased 3% due primarily to growth in compensation and health and benefits consulting. Organic revenue in Outsourcing decreased 32% due primarily to the previously announced termination of a significant outsourcing contract.
| | Fourth Quarter Ended | | | |
(millions) | | Dec 31, | | Dec 31, | | % | |
| | 2007 | | 2006 | | Change | |
Revenue | | $ | 373 | | $ | 364 | | 2 | % |
Expenses | | | | | | | |
Compensation and benefits | | 219 | | 217 | | 1 | |
Other expenses | | 94 | | 98 | | (4 | ) |
Total expenses | | 313 | | 315 | | (1 | ) |
| | | | | | | |
Pretax income | | $ | 60 | | $ | 49 | | 22 | % |
Pretax margin | | 16.1 | % | 13.5 | % | | |
| | | | | | | |
Pretax income - adjusted | | $ | 64 | | $ | 56 | | 14 | % |
Pretax margin - adjusted | | 17.2 | % | 15.4 | % | | |
Total expenses were relatively unchanged versus the prior year quarter due primarily to lower restructuring charges, benefits related to the 2005 restructuring program and other operational improvements, partially offset by a $14 million unfavorable impact from foreign currency translation.
Fourth quarter pretax income increased 22% to $60 million and the pretax margin increased 260 basis points to 16.1% versus the prior year quarter. Adjusting for certain items detailed on page 12, pretax income increased 14% to $64 million and the pretax margin increased 180 basis points to 17.2%.
4
UNALLOCATED INCOME AND EXPENSE
| | Fourth Quarter Ended | | | |
(millions) | | Dec 31, | | Dec 31, | | % | |
| | 2007 | | 2006 | | Change | |
Operating segment income before tax | | $ | 341 | | $ | 245 | | 39 | % |
Property & Casualty operations | | (4 | ) | (3 | ) | 33 | |
Unallocated investment income | | 11 | | 10 | | 10 | |
Unallocated expenses | | (39 | ) | (27 | ) | 44 | |
Interest expense | | (36 | ) | (30 | ) | 20 | |
Income from continuing operations before tax | | $ | 273 | | $ | 195 | | 40 | % |
Property & Casualty loss was $4 million compared to a loss of $3 million in the prior year quarter. All property & casualty business was placed into run-off in the fourth quarter 2006.
Unallocated investment income for the fourth quarter increased $1 million to $11 million compared to the prior year quarter. Unallocated expenses increased $12 million to $39 million versus the prior year quarter including the resolution of a $15 million non-cash balance sheet reconciliation difference in the U.K. Interest expense increased $6 million to $36 million versus the prior year quarter due primarily to a higher percentage of borrowings in foreign currencies and higher interest rates.
2007 FINANCIAL SUMMARY
Total revenue for 2007 increased 9% to $7.5 billion with organic revenue growth of 2%. Risk and Insurance Brokerage Services revenue increased 8% to $6.1 billion with organic revenue growth of 3%. Consulting revenue increased 5% to $1.4 billion with a decrease in organic revenue of 1%.
Net income for 2007 was $864 million or $2.69 per share, compared to $720 million or $2.13 per share for the prior year. Net income from continuing operations increased 50% to $672 million or $2.10 per share, compared to $447 million or $1.33 per share for the prior year. Certain items that impacted full year results and comparisons against the prior year are detailed in the reconciliations of the impact of non-GAAP measures on pages 11 and 12. Net income from continuing operations, excluding certain items, increased 43% to $2.37 per share compared to $1.66 per share for the prior year.
During 2007, the Company repurchased approximately 19.1 million shares of common stock for $751 million at an average price of $39.30 per share. As of December 31, 2007, the Company had approximately $2.8 billion of remaining share repurchase authorization, which includes the $2.6 billion authorized increase announced during the fourth quarter 2007.
5
Conference Call and Webcast Details
The Company will host a conference call on Friday, February 8, 2008 at 10:00 a.m. central time. Interested parties can listen to the conference call via a live audio webcast at 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, and specialty insurance underwriting. Through its 43,000 professionals 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 ranked by A.M. Best as the number one global insurance brokerage in 2007 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 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, our ability to successfully close the sales of our Combined Insurance and Sterling Life Insurance businesses, the impact of current, pending and future regulatory and legislative actions that affect our ability to market and sell, and be reimbursed at current levels for, our Sterling subsidiary’s Medicare Advantage health plans, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of investigations brought by U.S. state attorneys general, U.S. state insurance regulators, U.S. federal prosecutors, U.S. federal regulators, and regulatory authorities in the U.K. and other countries, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, ERISA class actions, the impact of the analysis of practices relating to stock options, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates. 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.
###
Investor Contact: | | Media Contact: |
Scott Malchow | | David Prosperi |
Vice President, Investor Relations | | Vice President, Global Public Relations |
312-381-3983 | | 312-381-2485 |
6
Aon Corporation
Consolidated Summary of Operations
| | Fourth Quarter Ended | | Twelve Months Ended | |
(millions except per share data) | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | |
Revenue | | | | | | | | | | | | | |
Commissions, fees and other | | $ | 1,967 | | $ | 1,825 | | 8 | % | $ | 7,170 | | $ | 6,660 | | 8 | % |
Investment income | | 65 | | 56 | | 16 | | 301 | | 221 | | 36 | |
Total revenue | | 2,032 | | 1,881 | | 8 | | 7,471 | | 6,881 | | 9 | |
| | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | |
Compensation and benefits | | 1,168 | | 1,158 | | 1 | | 4,388 | | 4,225 | | 4 | |
Other general expenses | | 502 | | 429 | | 17 | | 1,726 | | 1,637 | | 5 | |
Depreciation and amortization | | 53 | | 68 | | (22 | ) | 194 | | 224 | | (13 | ) |
Interest expense | | 36 | | 30 | | 20 | | 138 | | 129 | | 7 | |
Provision for New York and other state settlements | | — | | 1 | | (100 | ) | 1 | | 3 | | (67 | ) |
Total expenses | | 1,759 | | 1,686 | | 4 | | 6,447 | | 6,218 | | 4 | |
| | | | | | | | | | | | | |
Income from continuing operations before provision for income tax | | 273 | | 195 | | 40 | | 1,024 | | 663 | | 54 | |
Provision for income tax (2) | | 83 | | 52 | | 60 | | 352 | | 216 | | 63 | |
Income from continuing operations | | 190 | | 143 | | 33 | | 672 | | 447 | | 50 | |
| | | | | | | | | | | | | |
Discontinued operations | | | | | | | | | | | | | |
Income from discontinued operations | | 75 | | 123 | | (39 | ) | 316 | | 419 | | (25 | ) |
Provision for income tax (3) | | 58 | | 43 | | 35 | | 124 | | 147 | | (16 | ) |
Income from discontinued operations | | 17 | | 80 | | (79 | ) | 192 | | 272 | | (29 | ) |
Income before accounting change | | 207 | | 223 | | (7 | ) | 864 | | 719 | | 20 | |
Cumulative effect of change in accounting principle, net of tax (1) | | — | | — | | N/A | | — | | 1 | | (100 | ) |
Net income | | $ | 207 | | $ | 223 | | (7 | )% | $ | 864 | | $ | 720 | | 20 | % |
| | | | | | | | | | | | | |
Basic net income per share: | | | | | | | | | | | | | |
Continuing operations | | $ | 0.63 | | $ | 0.46 | | 37 | % | $ | 2.25 | | $ | 1.41 | | 60 | % |
Discontinued operations | | 0.06 | | 0.26 | | (77 | ) | 0.65 | | 0.86 | | (24 | ) |
Cumulative effect of change in accounting principle | | — | | — | | — | | — | | — | | — | |
Net income | | $ | 0.69 | | $ | 0.72 | | (4 | )% | $ | 2.90 | | $ | 2.27 | | 28 | % |
| | | | | | | | | | | | | |
Diluted net income per share: | | | | | | | | | | | | | |
Continuing operations | | $ | 0.59 | | $ | 0.43 | | 37 | % | $ | 2.10 | | $ | 1.33 | | 58 | % |
Discontinued operations | | 0.05 | | 0.24 | | (79 | ) | 0.59 | | 0.80 | | (26 | ) |
Cumulative effect of change in accounting principle | | — | | — | | — | | — | | — | | — | |
Net income | | $ | 0.64 | | $ | 0.67 | | (4 | )% | $ | 2.69 | | $ | 2.13 | | 26 | % |
| | | | | | | | | | | | | |
Diluted average common and common equivalent shares outstanding | | 324.1 | | 333.6 | | | | 323.0 | | 342.1 | | | |
(1) Adoption of FASB Statement No. 123R, “Share-Based Payments,” effective January 1, 2006.
(2) Tax rate from continuing operations is 30.4% and 26.7% for the fourth quarters ended December 31, 2007 and 2006, respectively,
and 34.4% and 32.6% for the twelve months ended December 31, 2007 and 2006, respectively.
(3) Tax rate from discontinued operations is 77.3% and 35.0% for the fourth quarters ended December 31, 2007 and 2006, respectively, and 39.2% and 35.1% for the twelve months ended December 31, 2007 and 2006, respectively.
7
Aon Corporation
Revenue from Continuing Operations
| | Fourth Quarter Ended | |
(millions) | | Dec. 31,
2007 | | Dec. 31,
2006 | | Percent
Change | | Less:
Currency Impact | | Less: Acquisitions, Divestitures & Transfers | | Less: All
Other (1) | | Organic Revenue Growth (2) | |
| | | | | | | | | | | | | | | |
Revenue | | | | | | | | | | | | | | | |
Risk and Insurance Brokerage Services: | | | | | | | | | | | | | | | |
Americas | | $ | 686 | | $ | 654 | | 5 | % | 2 | % | — | % | — | % | 3 | % |
United Kingdom | | 234 | | 206 | | 14 | | 10 | | 1 | | 4 | | (1 | ) |
Europe, Middle East & Africa | | 359 | | 291 | | 23 | | 12 | | 2 | | 4 | | 5 | |
Asia Pacific | | 145 | | 147 | | (1 | ) | 11 | | (2 | ) | (5 | ) | (5 | ) |
Reinsurance brokerage and related services | | 227 | | 224 | | 1 | | 1 | | 1 | | (4 | ) | 3 | |
Total Risk and Insurance Brokerage Services | | 1,651 | | 1,522 | | 8 | | 6 | | 1 | | (1 | ) | 2 | |
Consulting: | | | | | | | | | | | | | | | |
Consulting services | | 314 | | 280 | | 12 | | 5 | | 2 | | 2 | | 3 | |
Outsourcing | | 59 | | 84 | | (30 | ) | 3 | | (1 | ) | — | | (32 | ) |
Total consulting | | 373 | | 364 | | 2 | | 5 | | 2 | | — | | (5 | ) |
| | | | | | | | | | | | | | | |
Unallocated revenue | | 13 | | 18 | | (28 | ) | N/A | | N/A | | N/A | | N/A | |
| | | | | | | | | | | | | | | |
Intersegment revenues | | (5 | ) | (23 | ) | N/A | | N/A | | N/A | | N/A | | N/A | |
Total | | $ | 2,032 | | $ | 1,881 | | 8 | % | 6 | % | 1 | % | — | % | 1 | % |
(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).
8
Aon Corporation
Revenue from Continuing Operations
| | Twelve Months Ended | |
(millions) | | Dec. 31,
2007 | | Dec. 31,
2006 | | Percent
Change | | Less:
Currency
Impact | | Less:
Acquisitions, Divestitures & Transfers | | Less: All
Other (1) | | Organic Revenue Growth (2) | |
| | | | | | | | | | | | | | | |
Revenue | | | | | | | | | | | | | | | |
Risk and Insurance Brokerage Services: | | | | | | | | | | | | | | | |
Americas | | $ | 2,405 | | $ | 2,319 | | 4 | % | 1 | % | — | % | (2 | )% | 5 | % |
United Kingdom | | 815 | | 732 | | 11 | | 7 | | 2 | | 2 | | — | |
Europe, Middle East & Africa | | 1,375 | | 1,177 | | 17 | | 8 | | 1 | | 4 | | 4 | |
Asia Pacific | | 506 | | 478 | | 6 | | 9 | | (3 | ) | (2 | ) | 2 | |
Reinsurance brokerage and related services | | 958 | | 922 | | 4 | | 2 | | 1 | | (1 | ) | 2 | |
Total Risk and Insurance Brokerage Services | | 6,059 | | 5,628 | | 8 | | 4 | | 1 | | — | | 3 | |
Consulting: | | | | | | | | | | | | | | | |
Consulting services | | 1,117 | | 989 | | 13 | | 4 | | 2 | | 2 | | 5 | |
Outsourcing | | 235 | | 293 | | (20 | ) | 3 | | — | | (1 | ) | (22 | ) |
Total consulting | | 1,352 | | 1,282 | | 5 | | 4 | | 2 | | — | | (1 | ) |
| | | | | | | | | | | | | | | |
Unallocated revenue | | 89 | | 30 | | 197 | | N/A | | N/A | | N/A | | N/A | |
| | | | | | | | | | | | | | | |
Intersegment revenues | | (29 | ) | (59 | ) | N/A | | N/A | | N/A | | N/A | | N/A | |
Total | | $ | 7,471 | | $ | 6,881 | | 9 | % | 4 | % | 1 | % | 2 | % | 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).
9
Aon Corporation - Segments
Risk and Insurance Brokerage Services — Continuing Operations | | Fourth Quarter Ended | | Twelve Months Ended | |
(millions) | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | |
Revenue | | | | | | | | | | | | | |
Commissions, fees and other | | $ | 1,599 | | $ | 1,478 | | 8 | % | $ | 5,853 | | $ | 5,432 | | 8 | % |
Investment income | | 52 | | 44 | | 18 | | 206 | | 196 | | 5 | |
Total revenue | | 1,651 | | 1,522 | | 8 | | 6,059 | | 5,628 | | 8 | |
| | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | |
Compensation and benefits | | 932 | | 927 | | 1 | | 3,498 | | 3,362 | | 4 | |
Other expenses | | 438 | | 399 | | 10 | | 1,524 | | 1,425 | | 7 | |
Total expenses | | 1,370 | | 1,326 | | 3 | | 5,022 | | 4,787 | | 5 | |
| | | | | | | | | | | | | |
Income before provision for income tax | | $ | 281 | | $ | 196 | | 43 | % | $ | 1,037 | | $ | 841 | | 23 | % |
| | | | | | | | | | | | | |
Pretax income margin | | 17.0 | % | 12.9 | % | | | 17.1 | % | 14.9 | % | | |
| | | | | | | | | | | | | | | | | | |
Consulting — Continuing Operations | | Fourth Quarter Ended | | Twelve Months Ended | |
(millions) | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | |
Revenue | | | | | | | | | | | | | |
Commissions, fees and other | | $ | 372 | | $ | 363 | | 2 | % | $ | 1,343 | | $ | 1,277 | | 5 | % |
Investment income | | 1 | | 1 | | — | | 9 | | 5 | | 80 | |
Total revenue | | 373 | | 364 | | 2 | | 1,352 | | 1,282 | | 5 | |
| | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | |
Compensation and benefits | | 219 | | 217 | | 1 | | 823 | | 811 | | 1 | |
Other expenses | | 94 | | 98 | | (4 | ) | 340 | | 351 | | (3 | ) |
Total expenses | | 313 | | 315 | | (1 | ) | 1,163 | | 1,162 | | — | |
Income before provision for income tax | | $ | 60 | | $ | 49 | | 22 | % | $ | 189 | | $ | 120 | | 58 | % |
| | | | | | | | | | | | | |
Pretax income margin | | 16.1 | % | 13.5 | % | | | 14.0 | % | 9.4 | % | | |
Reconciliation of operating segment income before provision for income tax to income
from continuing operations before provision for income tax:
| | Fourth Quarter Ended | | Twelve Months Ended | |
(millions) | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | |
| | | | | | | | | | | | | |
Operating segment income: | | | | | | | | | | | | | |
Risk and Insurance Brokerage Services | | $ | 281 | | $ | 196 | | 43 | % | $ | 1,037 | | $ | 841 | | 23 | % |
Consulting | | 60 | | 49 | | 22 | | 189 | | 120 | | 58 | |
Operating segment income before provision for income tax | | 341 | | 245 | | 39 | | 1,226 | | 961 | | 28 | |
Property & Casualty operations | | (4 | ) | (3 | ) | 33 | | (13 | ) | (78 | ) | (83 | ) |
Unallocated investment income | | 11 | | 10 | | 10 | | 81 | | 15 | | 440 | |
Unallocated expenses | | (39 | ) | (27 | ) | 44 | | (132 | ) | (106 | ) | 25 | |
Interest expense | | (36 | ) | (30 | ) | 20 | | (138 | ) | (129 | ) | 7 | |
Income from continuing operations before provision for income tax | | $ | 273 | | $ | 195 | | 40 | % | $ | 1,024 | | $ | 663 | | 54 | % |
10
Aon Corporation
Reconciliation of the Impact of Non-GAAP Measures on Diluted Earnings Per Share
Fourth Quarter and Twelve Months Ended December 31, 2007 and 2006
| | Fourth Quarter Ended | | Twelve Months Ended | |
(millions except per share data) | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | | Dec. 31, 2007 | | Dec. 31, 2006 | | Percent Change | |
| | | | | | | | | | | | | |
Income from continuing operations before provision for income taxes - as reported | | $ | 273 | | $ | 195 | | 40 | % | $ | 1,024 | | $ | 663 | | 54 | % |
Adjustments: | | | | | | | | | | | | | |
Restructuring charges | | 34 | | 78 | | | | 85 | | 159 | | | |
Gain on sale of businesses | | (6 | ) | — | | | | (36 | ) | — | | | |
Resolution of U.K. balance sheet reconciliation difference | | 15 | | — | | | | 15 | | — | | | |
Reinsurance litigation | | — | | — | | | | 21 | | — | | | |
Gain on sale of Cambridge preferred stock investment | | — | | — | | | | — | | (35 | ) | | |
Gain on sale of building in Spain | | — | | — | | | | — | | (30 | ) | | |
Contingent commissions | | — | | — | | | | — | | (15 | ) | | |
Property & Caualty reserve adjustments | | — | | — | | | | — | | 81 | | | |
Endurance warrants | | — | | — | | | | — | | 14 | | | |
| | | | | | | | | | | | | |
Income from continuing operations before provision for income taxes - as adjusted | | 316 | | 273 | | 16 | | 1,109 | | 837 | | 32 | |
Provision for income taxes (1) | | 93 | | 79 | | | | 350 | | 277 | | | |
Income from continuing operations - as adjusted | | $ | 223 | | $ | 194 | | 15 | % | $ | 759 | | $ | 560 | | 36 | % |
Diluted earnings per share from continuing operations - as adjusted | | $ | 0.69 | | $ | 0.59 | | 17 | % | $ | 2.37 | | $ | 1.66 | | 43 | % |
| | | | | | | | | | | | | |
Income from discontinued operations before provision for income taxes - as reported | | $ | 75 | | $ | 123 | | (39 | )% | $ | 316 | | $ | 419 | | (25 | )% |
Adjustments: | | | | | | | | | | | | | |
Restructuring charges | | — | | 8 | | | | — | | 8 | | | |
CPG reserve adjustment | | — | | — | | | | — | | 21 | | | |
CPG gain on sale | | — | | (27 | ) | | | — | | (27 | ) | | |
AWG gain on sale | | — | | (16 | ) | | | — | | (16 | ) | | |
Income from discontinued operations before provision for income taxes - as adjusted | | 75 | | 88 | | (15 | ) | 316 | | 405 | | (22 | ) |
Provision for income taxes (2) | | 30 | | 19 | | | | 96 | | 130 | | | |
Income from discontinued operations - as adjusted | | $ | 45 | | $ | 69 | | (35 | )% | $ | 220 | | $ | 275 | | (20 | )% |
Diluted earnings per share from discontinued operations - as adjusted | | $ | 0.14 | | $ | 0.21 | | (33 | )% | $ | 0.68 | | $ | 0.80 | | (15 | )% |
| | | | | | | | | | | | | |
Total earnings per share | | $ | 0.83 | | $ | 0.80 | | 4 | % | $ | 3.05 | | $ | 2.46 | | 24 | % |
| | | | | | | | | | | | | |
Diluted average common and common equivalent shares outstanding (millions) | | 324.1 | | 333.6 | | | | 323.0 | | 342.1 | | | |
(1) | | Tax rate from continuing operations is 29.4% and 28.9% for the fourth quarters ended December 31, 2007 and 2006, respectively, and 31.6% and 33.1% for the twelve months ended December 31, 2007 and 2006, respectively. |
| | |
(2) | | Tax rate from discontinued operations is 40.0% and 21.6% for the fourth quarters ended December 31, 2007 and 2006, respectively, and 30.4% and 32.1% for the twelve months ended December 31, 2007 and 2006, respectively. |
11
Aon Corporation
Reconciliation of Non-GAAP Measures - Segments
Fourth Quarter and Twelve Months Ended December 31, 2007 and 2006 (1)
| | Fourth Quarter Ended December 31, 2007 | | Twelve Months Ended December 31, 2007 | |
(millions) | | Risk and Insurance Brokerage Services | | Consulting | | Unallocated Income & Expense | | Total | | Risk and Insurance Brokerage Services | | Consulting | | Unallocated Income & Expense | | Total | |
Revenue as reported | | $ | 1,651 | | $ | 373 | | $ | 8 | | $ | 2,032 | | $ | 6,059 | | $ | 1,352 | | $ | 60 | | $ | 7,471 | |
| | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations before | | | | | | | | | | | | | | | | | |
provision for income tax - as reported | | $ | 281 | | $ | 60 | | $ | (68 | ) | $ | 273 | | $ | 1,037 | | $ | 189 | | $ | (202 | ) | $ | 1,024 | |
Restructuring charges | | 30 | | 4 | | — | | 34 | | 74 | | 11 | | — | | 85 | |
Gain on sale of businesses | | (6 | ) | — | | — | | (6 | ) | (36 | ) | — | | — | | (36 | ) |
Resolution of U.K. balance sheet reconciliation difference | | — | | — | | 15 | | 15 | | — | | — | | 15 | | 15 | |
Reinsurance litigation | | — | | — | | — | | — | | 21 | | — | | — | | 21 | |
Income (loss) from continuing operations before | | | | | | | | | | | | | | | | | |
provision for income tax - as adjusted | | $ | 305 | | $ | 64 | | $ | (53 | ) | $ | 316 | | $ | 1,096 | | $ | 200 | | $ | (187 | ) | $ | 1,109 | |
| | | | | | | | | | | | | | | | | |
Income from continuing operations before | | | | | | | | | | | | | | | | | |
provision for income tax - margins as adjusted | | 18.5 | % | 17.2 | % | N/A | | 15.6 | % | 18.1 | % | 14.8 | % | N/A | | 14.8 | % |
| | Fourth Quarter Ended December 31, 2006 | | Twelve Months Ended December 31, 2006 | |
(millions) | | Risk and Insurance Brokerage Services | | Consulting | | Unallocated Income & Expense | | Total | | Risk and Insurance Brokerage Services | | Consulting | | Unallocated Income & Expense | | Total | |
Revenue as reported | | $ | 1,522 | | $ | 364 | | $ | (5 | ) | $ | 1,881 | | $ | 5,628 | | $ | 1,282 | | $ | (29 | ) | $ | 6,881 | |
Gain on Cambridge preferred stock investment | | — | | — | | — | | — | | (35 | ) | — | | — | | (35 | ) |
Contingent commissions | | — | | — | | — | | — | | (15 | ) | — | | — | | (15 | ) |
Endurance warrants | | — | | — | | — | | — | | — | | — | | 14 | | 14 | |
Revenue as adjusted | | $ | 1,522 | | $ | 364 | | $ | (5 | ) | $ | 1,881 | | $ | 5,578 | | $ | 1,282 | | $ | (15 | ) | $ | 6,845 | |
| | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations before | | | | | | | | | | | | | | | | | |
provision for income tax - as reported | | $ | 196 | | $ | 49 | | $ | (50 | ) | $ | 195 | | $ | 841 | | $ | 120 | | $ | (298 | ) | $ | 663 | |
Restructuring charges | | 70 | | 7 | | 1 | | 78 | | 136 | | 20 | | 3 | | 159 | |
Gain on sale of Cambridge preferred stock investment | | — | | — | | — | | — | | (35 | ) | — | | — | | (35 | ) |
Gain on sale of building in Spain | | — | | — | | — | | — | | (30 | ) | — | | — | | (30 | ) |
Contingent commissions | | — | | — | | — | | — | | (15 | ) | — | | — | | (15 | ) |
Property & Caualty reserve adjustments | | — | | — | | — | | — | | — | | — | | 81 | | 81 | |
Endurance warrants | | — | | — | | — | | — | | — | | — | | 14 | | 14 | |
Income (loss) from continuing operations before | | | | | | | | | | | | | | | | | |
provision for income tax - as adjusted | | $ | 266 | | $ | 56 | | $ | (49 | ) | $ | 273 | | $ | 897 | | $ | 140 | | $ | (200 | ) | $ | 837 | |
| | | | | | | | | | | | | | | | | |
Income from continuing operations before | | | | | | | | | | | | | | | | | |
provision for income tax - margins as adjusted | | 17.5 | % | 15.4 | % | N/A | | 14.5 | % | 16.1 | % | 10.9 | % | N/A | | 12.2 | % |
(1) | | Certain noteworthy items impacted revenue and pretax income in 2007 and 2006, which are described in this schedule. The revenue and pretax income (loss) amounts and related margins shown in the captions “Revenue as adjusted” and “Income (loss) from continuing operations before provision for income tax - as adjusted” are non-GAAP measures. |
12
Aon Corporation
2007 Restructuring Plan
By Type: | | Actual | | Estimated | |
(millions) | | Third Quarter
2007 | | Fourth Quarter
2007 | | Total Incurred to Date | | Total | |
Workforce reduction (Compensation and benefits) | | $ | 10 | | $ | 7 | | $ | 17 | | $ | 220 | |
Lease consolidation (Other general expenses) | | 4 | | 18 | | 22 | | 79 | |
Asset impairments (Depreciation and amortization) | | 2 | | 2 | | 4 | | 41 | |
Other costs associated with restructuring (Other general expenses) | | 1 | | 2 | | 3 | | 20 | |
Total restructuring and related expenses | | $ | 17 | | $ | 29 | | $ | 46 | | $ | 360 | |
By Segment: | | Actual | | Estimated | |
(millions) | | Third
Quarter
2007 | | Fourth
Quarter
2007 | | Total Incurred to Date | | Total | |
Risk and Insurance Brokerage Services | | $ | 16 | | $ | 25 | | $ | 41 | | $ | 320 | |
Consulting | | 1 | | 4 | | 5 | | 40 | |
Total restructuring and related expenses | | $ | 17 | | $ | 29 | | $ | 46 | | $ | 360 | |
2005 Restructuring Plan
By Type: | | Actual | |
(millions) | | Full Year 2005 | | Full Year 2006 | | Nine
Months
2007 | | Fourth
Quarter
2007 | | Full Year 2007 | | Total | |
Workforce reduction (Compensation and benefits) | | $ | 116 | | $ | 116 | | $ | 18 | | $ | 3 | | $ | 21 | | $ | 253 | |
Lease consolidation (Other general expenses) | | 20 | | 27 | | 11 | | 2 | | 13 | | 60 | |
Asset impairments (Depreciation and amortization) | | 17 | | 12 | | 3 | | — | | 3 | | 32 | |
Other costs associated with restructuring (Other general expenses) | | 5 | | 12 | | 4 | | — | | 4 | | 21 | |
Total restructuring and related expenses | | $ | 158 | | $ | 167 | | $ | 36 | | $ | 5 | | $ | 41 | | $ | 366 | |
By Segment: | | Actual | |
(millions) | | Full Year 2005 | | Full Year 2006 | | Nine Months 2007 | | Fourth Quarter 2007 | | Full Year 2007 | | Total | |
Risk and Insurance Brokerage Services | | $ | 143 | | $ | 136 | | $ | 28 | | $ | 5 | | $ | 33 | | $ | 312 | |
Consulting | | 8 | | 20 | | 6 | | — | | 6 | | 34 | |
Unallocated income and expense | | 4 | | 3 | | — | | — | | — | | 7 | |
Restructuring and related expenses - continuing operations | | 155 | | 159 | | 34 | | 5 | | 39 | | 353 | |
Restructuring and related expenses - discontinued operations | | 3 | | 8 | | 2 | | — | | 2 | | 13 | |
Total restructuring and related expenses | | $ | 158 | | $ | 167 | | $ | 36 | | $ | 5 | | $ | 41 | | $ | 366 | |
13
Aon Corporation
Consolidated Summary of Operations - Reclassified for Discontinued Operations
| | 2006 | | 2007 | |
(millions except per share data) | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Full Year | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Full Year | |
Revenue | | | | | | | | | | | | | | | | | | | | | |
Commissions, fees and other | | $ | 1,610 | | $ | 1,644 | | $ | 1,581 | | $ | 1,825 | | $ | 6,660 | | $ | 1,729 | | $ | 1,776 | | $ | 1,698 | | $ | 1,967 | | $ | 7,170 | |
Investment income | | 59 | | 51 | | 55 | | 56 | | 221 | | 69 | | 90 | | 77 | | 65 | | 301 | |
Total revenue | | 1,669 | | 1,695 | | 1,636 | | 1,881 | | 6,881 | | 1,798 | | 1,866 | | 1,775 | | 2,032 | | 7,471 | |
| | | | | | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | 1,005 | | 1,037 | | 1,025 | | 1,158 | | 4,225 | | 1,053 | | 1,109 | | 1,058 | | 1,168 | | 4,388 | |
Other general expenses | | 371 | | 387 | | 450 | | 429 | | 1,637 | | 423 | | 395 | | 406 | | 502 | | 1,726 | |
Depreciation and amortization | | 52 | | 51 | | 53 | | 68 | | 224 | | 47 | | 46 | | 48 | | 53 | | 194 | |
Interest expense | | 31 | | 34 | | 34 | | 30 | | 129 | | 35 | | 34 | | 33 | | 36 | | 138 | |
Provision for New York and other state settlements | | 1 | | 1 | | — | | 1 | | 3 | | — | | 1 | | — | | — | | 1 | |
Total expenses | | 1,460 | | 1,510 | | 1,562 | | 1,686 | | 6,218 | | 1,558 | | 1,585 | | 1,545 | | 1,759 | | 6,447 | |
| | | | | | | | | | | | | | | | | | | | | |
Income from continuing operations before provision for income tax | | 209 | | 185 | | 74 | | 195 | | 663 | | 240 | | 281 | | 230 | | 273 | | 1,024 | |
Provision for income tax | | 73 | | 64 | | 27 | | 52 | | 216 | | 75 | | 98 | | 96 | | 83 | | 352 | |
Income from continuing operations | | 136 | | 121 | | 47 | | 143 | | 447 | | 165 | | 183 | | 134 | | 190 | | 672 | |
| | | | | | | | | | | | | | | | | | | | | |
Discontinued operations | | | | | | | | | | | | | | | | | | | | | |
Income from discontinued operations | | 96 | | 111 | | 89 | | 123 | | 419 | | 73 | | 87 | | 81 | | 75 | | 316 | |
Provision for income tax | | 35 | | 39 | | 30 | | 43 | | 147 | | 25 | | 30 | | 11 | | 58 | | 124 | |
Income from discontinued operations | | 61 | | 72 | | 59 | | 80 | | 272 | | 48 | | 57 | | 70 | | 17 | | 192 | |
| | | | | | | | | | | | | | | | | | | | | |
Income before accounting change | | 197 | | 193 | | 106 | | 223 | | 719 | | 213 | | 240 | | 204 | | 207 | | 864 | |
Cumulative effect of change in accounting principle, net of tax | | 1 | | — | | — | | — | | 1 | | — | | — | | — | | — | | — | |
Net income | | $ | 198 | | $ | 193 | | $ | 106 | | $ | 223 | | $ | 720 | | $ | 213 | | $ | 240 | | $ | 204 | | $ | 207 | | $ | 864 | |
| | | | | | | | | | | | | | | | | | | | | |
Basic net income per share: | | | | | | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.42 | | $ | 0.37 | | $ | 0.15 | | $ | 0.46 | | $ | 1.41 | | $ | 0.55 | | $ | 0.62 | | $ | 0.45 | | $ | 0.63 | | $ | 2.25 | |
Discontinued operations | | 0.19 | | 0.23 | | 0.19 | | 0.26 | | 0.86 | | 0.16 | | 0.19 | | 0.24 | | 0.06 | | 0.65 | |
Cumulative effect of change in accounting principle | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Net income | | $ | 0.61 | | $ | 0.60 | | $ | 0.34 | | $ | 0.72 | | $ | 2.27 | | $ | 0.71 | | $ | 0.81 | | $ | 0.69 | | $ | 0.69 | | $ | 2.90 | |
| | | | | | | | | | | | | | | | | | | | | |
Dilutive net income per share: | | | | | | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.40 | | $ | 0.36 | | $ | 0.15 | | $ | 0.43 | | $ | 1.33 | | $ | 0.51 | | $ | 0.57 | | $ | 0.42 | | $ | 0.59 | | $ | 2.10 | |
Discontinued operations | | 0.17 | | 0.21 | | 0.17 | | 0.24 | | 0.80 | | 0.15 | | 0.18 | | 0.22 | | 0.05 | | 0.59 | |
Cumulative effect of change in accounting principle | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Net income | | $ | 0.57 | | $ | 0.57 | | $ | 0.32 | | $ | 0.67 | | $ | 2.13 | | $ | 0.66 | | $ | 0.75 | | $ | 0.64 | | $ | 0.64 | | $ | 2.69 | |
| | | | | | | | | | | | | | | | | | | | | |
Dilutive average common and common equivalent shares outstanding | | 350.2 | | 344.8 | | 340.1 | | 333.6 | | 342.1 | | 324.4 | | 321.9 | | 321.5 | | 324.1 | | 323.0 | |
14
Aon Corporation
Segments - - Reclassification for Discontinued Operations
| | 2006 | | 2007 | |
(millions) | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Full Year | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | Nine Months | |
Revenue | | | | | | | | | | | | | | | | | | | |
Risk and insurance brokerage services | | $ | 1,380 | | $ | 1,385 | | $ | 1,341 | | $ | 1,522 | | $ | 5,628 | | $ | 1,456 | | $ | 1,515 | | $ | 1,437 | | $ | 4,408 | |
| | | | | | | | | | | | | | | | | | | |
Consulting | | 308 | | 309 | | 301 | | 364 | | 1,282 | | 329 | | 325 | | 325 | | 979 | |
| | | | | | | | | | | | | | | | | | | |
Insurance underwriting : | | | | | | | | | | | | | | | | | | | |
As reported | | 495 | | 505 | | 519 | | 527 | | 2,046 | | 574 | | 610 | | 627 | | 1,811 | |
Less: reclassification to discontinued operations | | (490 | ) | (504 | ) | (518 | ) | (519 | ) | (2,031 | ) | (573 | ) | (607 | ) | (624 | ) | (1,804 | ) |
Less: reclassification to unallocated revenue | | (5 | ) | (1 | ) | (1 | ) | (8 | ) | (15 | ) | (1 | ) | (3 | ) | (3 | ) | (7 | ) |
As reclassified | | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| | | | | | | | | | | | | | | | | | | |
Unallocated revenue: | | | | | | | | | | | | | | | | | | | |
As reported | | (3 | ) | 18 | | 19 | | 23 | | 57 | | 32 | | 44 | | 26 | | 102 | |
Less: reclassification to discontinued operations | | (6 | ) | (9 | ) | (14 | ) | (13 | ) | (42 | ) | (10 | ) | (15 | ) | (8 | ) | (33 | ) |
Add: reclassification from insurance underwriting | | 5 | | 1 | | 1 | | 8 | | 15 | | 1 | | 3 | | 3 | | 7 | |
As reclassified | | (4 | ) | 10 | | 6 | | 18 | | 30 | | 23 | | 32 | | 21 | | 76 | |
| | | | | | | | | | | | | | | | | | | |
Intersegment revenues | | (15 | ) | (9 | ) | (12 | ) | (23 | ) | (59 | ) | (10 | ) | (6 | ) | (8 | ) | (24 | ) |
Total | | $ | 1,669 | | $ | 1,695 | | $ | 1,636 | | $ | 1,881 | | $ | 6,881 | | $ | 1,798 | | $ | 1,866 | | $ | 1,775 | | $ | 5,439 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income tax | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Risk and insurance brokerage services | | $ | 240 | | $ | 215 | | $ | 190 | | $ | 196 | | $ | 841 | | $ | 242 | | $ | 278 | | $ | 236 | | $ | 756 | |
| | | | | | | | | | | | | | | | | | | |
Consulting | | 30 | | 23 | | 18 | | 49 | | 120 | | 47 | | 44 | | 38 | | 129 | |
| | | | | | | | | | | | | | | | | | | |
Insurance underwriting : | | | | | | | | | | | | | | | | | | | |
As reported | | 53 | | 75 | | (27 | ) | 36 | | 137 | | 59 | | 67 | | 63 | | 189 | |
Less: reclassification to discontinued operations | | (53 | ) | (73 | ) | (54 | ) | (42 | ) | (222 | ) | (64 | ) | (70 | ) | (70 | ) | (204 | ) |
Less: reclassification to unallocated income | | — | | (2 | ) | 81 | | 6 | | 85 | | 5 | | 3 | | 7 | | 15 | |
As reclassified | | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| | | | | | | | | | | | | | | | | | | |
Unallocated income: | | | | | | | | | | | | | | | | | | | |
As reported | | (57 | ) | (46 | ) | (42 | ) | (33 | ) | (178 | ) | (37 | ) | (24 | ) | (25 | ) | (86 | ) |
Less: reclassification to discontinued operations | | (4 | ) | (9 | ) | (11 | ) | (11 | ) | (35 | ) | (7 | ) | (14 | ) | (12 | ) | (33 | ) |
Add: reclassification from insurance underwriting | | — | | 2 | | (81 | ) | (6 | ) | (85 | ) | (5 | ) | (3 | ) | (7 | ) | (15 | ) |
As reclassified | | (61 | ) | (53 | ) | (134 | ) | (50 | ) | (298 | ) | (49 | ) | (41 | ) | (44 | ) | (134 | ) |
| | | | | | | | | | | | | | | | | | | |
Total | | $ | 209 | | $ | 185 | | $ | 74 | | $ | 195 | | $ | 663 | | $ | 240 | | $ | 281 | | $ | 230 | | $ | 751 | |
| | | | | | | | | | | | | | | | | | | |
Income from continuing operations before income tax - margins | | | | | | | | | | | | | | | | | | | |
Risk and insurance brokerage services | | 17.4 | % | 15.5 | % | 14.2 | % | 12.9 | % | 14.9 | % | 16.6 | % | 18.3 | % | 16.4 | % | 17.2 | % |
| | | | | | | | | | | | | | | | | | | |
Consulting | | 9.7 | % | 7.4 | % | 6.0 | % | 13.5 | % | 9.4 | % | 14.3 | % | 13.5 | % | 11.7 | % | 13.2 | % |
| | | | | | | | | | | | | | | | | | | |
Insurance underwriting: | | | | | | | | | | | | | | | | | | | |
As reported | | 10.7 | % | 14.9 | % | -5.2 | % | 6.8 | % | 6.7 | % | 10.3 | % | 11.0 | % | 10.0 | % | 10.4 | % |
As reclassified | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | |
| | | | | | | | | | | | | | | | | | | |
Total: | | | | | | | | | | | | | | | | | | | |
As reported | | 12.3 | % | 12.1 | % | 6.4 | % | 10.3 | % | 10.3 | % | 13.1 | % | 14.7 | % | 13.0 | % | 13.6 | % |
As reclassified | | 12.5 | % | 10.9 | % | 4.5 | % | 10.4 | % | 9.6 | % | 13.3 | % | 15.1 | % | 13.0 | % | 13.8 | % |
15
Aon Corporation
Accident & Health and Life
| | 2006 | | 2007 | |
(millions except per share data) | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Full
Year | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Full
Year | |
Revenue | | | | | | | | | | | | | | | | | | | | | |
Commissions and fees | | $ | 3 | | $ | 7 | | $ | 6 | | $ | 6 | | $ | 22 | | $ | 6 | | $ | 5 | | $ | 6 | | $ | 12 | | $ | 29 | |
Premiums and other | | 463 | | 472 | | 489 | | 489 | | 1,913 | | 539 | | 573 | | 587 | | 611 | | 2,310 | |
Investment income | | 30 | | 34 | | 37 | | 37 | | 138 | | 38 | | 44 | | 39 | | 42 | | 163 | |
Total revenue | | 496 | | 513 | | 532 | | 532 | | 2,073 | | 583 | | 622 | | 632 | | 665 | | 2,502 | |
| | | | | | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | 92 | | 94 | | 91 | | 99 | | 376 | | 99 | | 98 | | 98 | | 99 | | 394 | |
Other general expenses | | 94 | | 80 | | 107 | | 104 | | 385 | | 93 | | 89 | | 87 | | 139 | | 408 | |
Benefits to policyholders | | 250 | | 253 | | 266 | | 273 | | 1,042 | | 317 | | 348 | | 363 | | 338 | | 1,366 | |
Depreciation and amortization | | 3 | | 4 | | 3 | | 3 | | 13 | | 3 | | 3 | | 2 | | 3 | | 11 | |
Total expenses | | 439 | | 431 | | 467 | | 479 | | 1,816 | | 512 | | 538 | | 550 | | 579 | | 2,179 | |
| | | | | | | | | | | | | | | | | | | | | |
Income before provision for income tax | | 57 | | 82 | | 65 | | 53 | | 257 | | 71 | | 84 | | 82 | | 86 | | 323 | |
Provision for income tax | | 20 | | 28 | | 22 | | 8 | | 78 | | 24 | | 29 | | 28 | | 56 | | 137 | |
Net income | | $ | 37 | | $ | 54 | | $ | 43 | | $ | 45 | | $ | 179 | | $ | 47 | | $ | 55 | | $ | 54 | | $ | 30 | | $ | 186 | |
| | | | | | | | | | | | | | | | | | | | | |
Basic net income per share | | $ | 0.11 | | $ | 0.17 | | $ | 0.14 | | $ | 0.15 | | $ | 0.56 | | $ | 0.16 | | $ | 0.19 | | $ | 0.18 | | $ | 0.10 | | $ | 0.63 | |
| | | | | | | | | | | | | | | | | | | | | |
Dilutive net income per share | | $ | 0.11 | | $ | 0.16 | | $ | 0.13 | | $ | 0.13 | | $ | 0.52 | | $ | 0.14 | | $ | 0.17 | | $ | 0.17 | | $ | 0.09 | | $ | 0.58 | |
| | | | | | | | | | | | | | | | | | | | | |
Dilutive average common and common equivalent shares outstanding | | 350.2 | | 344.8 | | 340.1 | | 333.6 | | 342.1 | | 324.4 | | 321.9 | | 321.5 | | 324.1 | | 323.0 | |
16
