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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number: 1-7933
Aon Corporation
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of 36-3051915
Incorporation or Organization) (I.R.S. Employer
200 E. RANDOLPH STREET, Identification No.)
CHICAGO, ILLINOIS 60601
(Address of Principal Executive Offices) (Zip Code)
(312) 381-1000
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- -------------------------- ------------------------
Common Stock, $1 par value New York Stock Exchange
7.40% Notes Due 2002 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements,
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 25, 2002 was $8,384,338,140.
Number of shares of $1.00 par value Common Stock outstanding as of February 25,
2002 was 271,430,890.
DOCUMENTS FROM WHICH INFORMATION IS INCORPORATED BY REFERENCE:
Annual Report to Stockholders of the Registrant for the Year 2001 (Parts I, II
and IV)
Notice of Annual Meeting of Holders of Common Stock and Series C
Preferred Stock and Proxy Statement for Annual Meeting of Stockholders of the
Registrant on April 19, 2002 (Part III)
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PART I
ITEM 1. BUSINESS.
The Registrant is a holding company whose operating subsidiaries carry
on business in three distinct operating segments: (i) insurance brokerage and
other services, (ii) consulting, and (iii) insurance underwriting. Incorporated
in 1979, it is the parent corporation of long-established and more recently
formed companies.
The Registrant acquired in 2001, among other companies and businesses,
ASI Solutions Incorporated (ASI), a worldwide provider of human resources
administration and compensation consulting services, and First Extended, Inc.,
an underwriter and administrator of automobile extended warranty products.
The Insurance Brokerage and Other Services segment consists principally
of Aon's retail, reinsurance and wholesale brokerage, as well as related
insurance services, including claims services, underwriting management, captive
insurance company management services and premium financing. These services are
provided by subsidiaries of Aon Group, Inc., and certain other indirect
subsidiaries of the Registrant (the "Aon Group") including Aon Risk Services
Companies, Inc.; Aon Holdings International bv; Aon Services Group, Inc.; Aon Re
Worldwide, Inc.; Aon Limited (U.K.); Cananwill, Inc.; and Premier Auto Finance,
Inc.
The Consulting segment provides a full range of human capital
management services utilizing five practices: employee benefits, compensation,
management consulting, outsourcing and communications. These services are
provided primarily by subsidiaries and affiliates of Aon Consulting Worldwide,
Inc. which is also a subsidiary of Aon Group.
Aon's Insurance Underwriting segment is comprised of supplemental
accident and health and life insurance, and extended warranty and casualty
insurance products and services. Combined Insurance Company of America("Combined
Insurance") engages in the marketing and underwriting of accident and health and
life insurance products. Combined Specialty Insurance Company (formerly known as
Virginia Surety Company, Inc.)and London General Insurance Company Limited offer
extended warranty and casualty insurance products and services.
In November 2000, the Registrant announced a business transformation
plan, which began in fourth quarter 2000 and will continue into 2002. The
transformation plan will affect each operating segment; however, most changes
will affect the largest operating segment, Insurance Brokerage and Other
Services, and will occur in the major countries of operation, the U.S. and the
United Kingdom.
In April 2001, the Registrant announced a plan to spin off its
insurance underwriting business to Aon's common stockholders, creating two
independent, publicly-traded companies. The spin-off companies will be named
Combined Specialty Corporation. The transaction requires final Board of
Directors approval, a favorable Internal Revenue Service tax ruling and certain
insurance regulatory approvals and is currently expected to be completed in
spring 2002.
The Registrant hereby incorporates by reference "Business
Transformation Plan" on page 43 of the Annual Report to Stockholders of the
Registrant for the Year 2001 ("Annual Report"), as well as pages 6 through 15,
23 through 27, and pages 58, 59 and 63 of the Annual Report.
COMPETITION AND INDUSTRY POSITION
(1) INSURANCE BROKERAGE AND OTHER SERVICES
Aon Group, Inc.; Aon Risk Services Companies, Inc.; Aon Limited (U.K.);
Aon Holdings International bv; Aon Services Group, Inc.; Aon Re Worldwide, Inc.;
Cananwill, Inc.; and Premier Auto Finance, Inc.
Aon Group affiliated companies conduct the Registrant's brokerage and
consulting operations, and have 550 offices around the world in over 125
countries and sovereignties. In 2001, those companies employed nearly 43,000
professionals and support personnel to serve the diverse needs of clients.
Aon Group's retail brokerage companies operate in a highly competitive
industry and compete with a large number of retail insurance brokerage and
agency firms as well as individual brokers and agents and direct writers of
insurance coverage. Aon Group's companies provide a broad spectrum of advisory
and outsourcing services
including risk identification and assessment, alternative risk financing, safety
engineering, loss management and program administration for clients. They also
design, place and implement customized insurance products. They have also
developed certain specialist areas such as marine, aviation, directors' and
officers' and professional liability, financial institutions, construction,
energy, media, healthcare and entertainment. In 2001, investments were made in
professional talent, technology, process improvement and the development of
specialized products and services to meet the evolving needs of clients. Those
companies operate through offices located in North America, Europe, Latin
America, Africa, Australia and Asia/Pacific.
Aon Group's companies address the highly specialized product
development, consulting and administrative risk management needs of professional
groups, service businesses, governments, healthcare providers and commercial
organizations. They also provide underwriting management skills, claims and risk
management expertise, and third-party administration services to insurance
companies, and insurance brokerage services for individuals. They market and
broker both the primary and reinsurance risks of these programs. For
individuals, associations and businesses, affinity products for professional
liability, life, disability income and personal lines are provided.
Aon's reinsurance brokerage activities are organized primarily under
Aon Re in the United States and Aon Limited in the United Kingdom, constituting
the largest reinsurance broker in the world and offering sophisticated advisory
services in program design that enhance the risk/return characteristics of
insurance policy portfolios and improve capital utilization, along with the
evaluation of catastrophic loss exposures. The companies also participate in
placement and captive management services.
Premium-related financing services are available to clients of Aon
Group and other independent organizations through Cananwill. Certain retail
automotive organizations have also been provided a service which purchases a
select amount of their auto financing and leasing contracts from individuals and
sells them to unaffiliated parties through companies associated with Premier
Auto Finance, Inc., which then continue the management of collections on the
contracts and provide other related services. After March 2001, contract
purchasing by companies associated with Premier Auto Finance, Inc. were no
longer generally available, but service continued on existing contracts with
current clients.
(2) CONSULTING
Aon Consulting Worldwide, Inc.
Aon Consulting Worldwide, Inc. is one of the world's largest integrated
human capital consulting organizations. The operations of this segment provide a
full range of human capital management services that serve three major client
segments - large corporations, middle market companies and small firms.
Around the world, companies have to find advanced ways to attract and
retain workers with the right skill levels and commitments, and we anticipate an
increased demand for consulting services. Aon Consulting, with its expertise in
employee benefits, compensation, management consulting, outsourcing and
communication, and its access to the Registrant's other subsidiaries, is
well-positioned to serve this market. Aon Consulting subsidiaries offer services
to clients including construction and implementation of benefit packages,
proprietary research on employee commitment and loyalty; compensation design;
assistance in process improvement and design, leadership, organization and human
capital development; employment processing, performance improvement, benefits
administration and other employment services; and advice to companies on
initiatives to support their corporate vision. The 2001 acquisition of ASI and
the 2000 acquisition of Actuarial Sciences Associates, Inc. expanded Aon's
ability to provide outsourcing services to a broad spectrum of large corporate
clients.
(3) INSURANCE UNDERWRITING
Combined Insurance Company of America ("Combined Insurance"); Combined
Life Insurance Company of New York ("CLICNY"); Combined Specialty Insurance
Company (CSIC); London General Insurance Company Limited ("London General"); and
Aon Warranty Group, Inc. ("Aon Warranty").
The Registrant's insurance underwriting subsidiaries are part of a
highly competitive industry that serves individual consumers in North America,
Europe, Latin America and Asia/Pacific by providing accident and health
coverage, traditional life insurance and extended warranty and casualty
insurance products and services through distribution networks, most of which are
directly owned by the Registrant's subsidiaries.
The supplemental accident and health and life distribution network
encompasses primarily the agents of Combined Insurance and CLICNY (which
operates exclusively in the State of New York). Combined Insurance, the
Registrant's principal accident and health and life insurer, has a sales force
of 7,000 career agents calling on individuals to sell a broad spectrum of low
premium, low limit accident and health products. In addition, Combined Insurance
has developed relationships with select brokers and consultants to reach
specific niche markets. Combined Insurance offers a wide range of accident,
sickness, short-term disability and other supplemental insurance products. Most
of Combined Insurance's products are primarily fixed-indemnity obligations,
thereby not subject to escalating medical costs. Combined Insurance offers a
simplified accident and sickness long-term disability policy. Combined Insurance
has expanded its product distribution to include direct response programs,
affinity groups and worksite marketing, creating access to new markets and
potential new policyholders. Combined Insurance's business is conducted in the
United States, Canada, Latin America, Europe and Asia/Pacific.
The Registrant's extended warranty and casualty insurance business,
conducted by CSIC, its branches and subsidiaries in North America, South America
and Asia/Pacific and London General in Europe, provides warranties on
automobiles and a variety of consumer goods, including electronics and
appliances. In addition, these subsidiaries provide non-structural home
warranties and other warranty products, such as credit card enhancements and
affinity warranty programs. CSIC and London General are among the world's
largest underwriters of consumer extended warranties. The extended warranty
products are sold in the United States, Canada, Latin America, Europe and
Asia/Pacific. The administration of certain warranty services on automobiles,
electronic goods, personal computers and appliances is handled by certain
operations in the Insurance Brokerage and Other Services segment. Revenues
earned from this area will be reflected as revenues in CSC after the planned
spin-off. A new initiative was recently launched to begin actively writing
commercial property and casualty risks, consisting primarily of excess and
surplus lines, errors and omissions, excess liability and workers' compensation.
In 2001, the Registrant's underwriting business invested $227 million
to obtain an ownership interest in Endurance Specialty Insurance, Ltd., which
offers property and casualty insurance and reinsurance on a worldwide basis. The
investment will help provide much needed underwriting capacity to commercial
firms and insurance and reinsurance customers and will allow the underwriting
business to participate in the growth expected in these areas.
(4) DISCONTINUED OPERATIONS
The Registrant hereby incorporates by reference note 6 of the Notes to
Consolidated Financial Statements on page 44 of the Annual Report.
LICENSING AND REGULATION
Regulatory authorities in the states or countries in which the
operating subsidiaries of Aon Group conduct business may require individual or
company licensing to act as brokers, agents, third party administrators,
managing general agents, reinsurance intermediaries or adjusters. Under the laws
of most states in the United States and in most foreign countries, regulatory
authorities have relatively broad discretion with respect to granting, renewing
and revoking brokers' and agents' licenses to transact business in the state or
country. The manner of operating in particular states and countries may vary
according to the licensing requirements of the particular state or country,
which may require, among other things, that a firm operate in the state or
country through a local corporation. In a few states and countries, licenses are
issued only to individual residents or locally-owned business entities. In such
cases, Aon Group subsidiaries have arrangements with residents or business
entities licensed to act in the state or country.
Insurance companies must comply with laws and regulations of the
jurisdictions in which they do business. These laws and regulations are designed
to ensure financial solvency of insurance companies and to require fair and
adequate service and treatment for policyholders. They are enforced by the
states in the United States, by industry self-regulating agencies in the United
Kingdom, and by various regulatory agencies in other countries through the
granting and revoking of licenses to do business, licensing of agents,
monitoring of trade practices, policy form approval, minimum loss ratio
requirements, limits on premium and commission rates, and minimum reserve and
capital requirements. Compliance is monitored by the state insurance departments
through periodic regulatory reporting procedures and periodic examinations. The
quarterly and annual financial reports to the regulators in the United States
utilize statutory accounting principles which are different from accounting
principles generally accepted in the United States which are used in
stockholders' reports. The statutory accounting principles, in
keeping with the intent to assure the protection of policyholders are based, in
general, on a liquidation concept while accounting principles generally accepted
in the United States are based on a going-concern concept.
The state insurance regulators are members of the National Association
of Insurance Commissioners ("NAIC"). The NAIC seeks to promote uniformity of,
and to enhance the state regulation of, insurance. Both the NAIC and the
individual states continue to focus on the solvency of insurance companies and
their conduct in the market place. This focus is reflected in additional
regulatory oversight by the states and emphasis on the enactment or adoption of
a series of NAIC model laws and regulations designed to promote solvency. The
NAIC revised its Accounting Practices and Procedures Manual in a process
referred to as Codification. The revised manual was effective January 1, 2001.
The domiciliary states of Aon's major insurance subsidiaries have adopted the
provisions of the revised manual. The revised manual has changed, to some
extent, prescribed statutory accounting practices and resulted in changes to the
accounting practices that Aon's major insurance subsidiaries use to prepare
their statutory-basis financial statements. The impact of these changes to Aon's
major insurance subsidiaries was to increase the statutory capital and surplus
by $54 million as of January 1, 2001.
Several years ago, the NAIC developed a formula for analyzing insurers
called risk-based capital ("RBC"). RBC is intended to establish "minimum"
capital threshold levels that vary with the size and mix of a company's
business. It is designed to identify companies with the capital levels that may
require regulatory attention. RBC does not have any significant impact on the
insurance business of the Registrant.
The state insurance holding company laws require prior notice to and
approval of the domestic state insurance department of intracorporate transfers
of assets within the holding company structure, including the payment of
dividends by insurance company subsidiaries. In addition, the premium finance
loans by Cananwill, Inc., an indirect wholly-owned subsidiary of the Registrant,
are subject to one or more of truth-in-lending and credit regulations, insurance
premium finance acts, retail installment sales acts and other similar consumer
protection legislation. Failure to comply with such laws or regulations can
result in the temporary suspension or permanent loss of the right to engage in
business in a particular jurisdiction as well as other penalties.
Recent federal and state laws and proposals mandating specific
practices by medical insurers and the health care industry will not, because of
the nature of the business of the Registrant's subsidiaries, materially affect
the Registrant. Numerous states have had legislation introduced to reform the
health care system and such legislation has passed in several states. While it
is impossible to forecast the precise nature of future federal and state health
care changes, the Registrant does not expect a major impact on its operations
because of the supplemental nature of most of the policies issued by its
insurance subsidiaries and because the coverages are primarily purchased to
provide, on a fixed-indemnity basis, protection against loss-of-time or
disability benefits. Congress has passed the Financial Services Modernization
Act commonly known as S 900 or the Gramm, Leach, Bliley Act. While S 900 makes
substantial changes in allowing financial organizations to diversify, the
Registrant does not believe its enactment will have a material effect on the
business of its insurance subsidiaries.
CLIENTELE
No significant part of the Registrant's or its subsidiaries' business
is dependent upon a single client or on a few clients, the loss of any one of
which would have a material adverse effect on the Registrant.
EMPLOYEES
The Registrant's subsidiaries had approximately 53,000 employees at the
end of 2001 of whom approximately 46,000 are salaried and hourly employees and
the remaining 7,000 are career agents who are generally compensated wholly or
primarily by commission.
ITEM 2. PROPERTIES.
The Registrant's subsidiaries own and occupy office buildings in six
states and certain foreign countries, and lease office space elsewhere in the
United States and in various foreign cities. In general, no difficulty is
anticipated in negotiating renewals as leases expire or in finding other
satisfactory space if the premises become unavailable.
ITEM 3. LEGAL PROCEEDINGS.
The Registrant hereby incorporates by reference note 15 of the Notes to
Consolidated Financial Statements on page 57 of the Annual Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the Registrant are regularly elected by its Board
of Directors at the annual meeting of the Board which is held following each
annual meeting of the stockholders of the Registrant. The executive officers of
the Registrant were elected to their current positions on April 20, 2001 to
serve until the meeting of the Board following the annual meeting of
stockholders on April 19, 2002. Ages shown are as of December 31, 2001.
For information concerning certain directors and executive officers of
the Registrant, see item 10 below. As of March 1, 2002, the following
individuals are also executive officers of the Registrant as defined in Rule
16a-1(f):
HAS CONTINUOUSLY
SERVED AS AN OFFICER
OF REGISTRANT OR
NAME, AGE, AND ONE OR MORE OF
CURRENT OFFICE ITS SUBSIDIARIES BUSINESS EXPERIENCE
OR PRINCIPAL POSITION SINCE PAST 5 YEARS
--------------------- ----- ------------
Harvey N. Medvin, 65 1972 Mr. Medvin became Vice President and Chief
Executive Vice President and Financial Officer of the Registrant in 1982 and
Chief Financial Officer was elected to his current position in 1987. He
also serves as a Director or Officer of certain of
the Registrant's subsidiaries.
Michael A. Conway, 54 1990 Mr. Conway was Vice President of Combined
Senior Vice President and Insurance from 1980 to 1984. Following other
Senior Investment Officer employment, Mr. Conway rejoined the Registrant
in 1990 as Senior Vice President of Combined
Insurance and was elected to his current
position in 1991. He also serves as Director
or Officer of certain of the Registrant's
subsidiaries.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
The Registrant's $1.00 par value common shares ("Common Shares") are
traded on the New York stock exchange. The Registrant hereby incorporates by
reference the "Dividends paid per share" and "Price range" data on page 61 of
the Annual Report.
The Registrant had approximately 11,912 holders of record of its Common
Shares as of February 25, 2002.
The Registrant hereby incorporates by reference note 11 of the Notes to
Consolidated Financial Statements on pages 48 and 49 of the Annual Report.
ITEM 6. SELECTED FINANCIAL DATA.
The Registrant hereby incorporates by reference the "Selected Financial
Data" table on page 61 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Registrant hereby incorporates by reference "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 18 through 31 and "Information Concerning Forward-Looking Statements" on
the inside back cover of the Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Registrant hereby incorporates by reference "Market Risk Exposure"
on page 31 of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Registrant hereby incorporates by reference the following
statements, notes and data from the Annual Report.
Page(s)
-------
Consolidated Financial Statements ............................ 32 - 36
Notes to Consolidated Financial Statements ................... 37 - 59
Report of Ernst & Young LLP, Independent Auditors ............ 60
Quarterly Financial Data ..................................... 62
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Registrant hereby incorporates by reference the information on
pages 3, 6 and 7 of the Proxy Statement For The Annual Meeting of the
Stockholders on April 19, 2002, of the Registrant ("Proxy Statement") concerning
the following Directors of the Registrant, each of whom also serves as an
executive officer of the Registrant as defined in Rule 16a-1(f): Patrick G.
Ryan, Michael D. O'Halleran and Raymond I. Skilling. Information concerning
additional executive officers of the Registrant is contained in Part I hereof,
pursuant to General Instruction G(3) and Instruction 3 to Item 401(b) of
Regulation S-K. The Registrant also hereby incorporates by reference the
information on pages 10 and 11 of the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The Registrant hereby incorporates by reference the information under
the headings "Executive Compensation," "Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values," "Option Grants in 2001 Fiscal
Year" and "Pension Plan Table" on pages 14 through 17 of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Registrant hereby incorporates by reference the share ownership
data contained on pages 2, 8 and 9 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Registrant hereby incorporates by reference the information under
the heading "Transactions With Management" on pages 21 and 22 of the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) (1) AND (2). The Registrant has incorporated by reference from the Annual
Report (see Item 8) the following consolidated financial statements of the
Registrant and subsidiaries:
Annual
Report
Page(s)
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Consolidated Statements of Financial Position - As of December 31, 2001 and 2000 32 - 33
Consolidated Statements of Income - Years Ended December 31, 2001, 2000 and 1999 34
Consolidated Statements of Cash Flows - Years Ended December 31, 2001, 2000 and
1999 35
Consolidated Statements of Stockholders' Equity - Years Ended December 31, 2001,
2000 and 1999 36
Notes to Consolidated Financial Statements 37 - 59
Report of Ernst & Young LLP, Independent Auditors 60
Quarterly Financial Data 62
Financial statement schedules of the Registrant and consolidated subsidiaries
not included in the Annual Report but filed herewith:
Consolidated Financial Statement Schedules -
Schedule
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Condensed Financial Information of Registrant I
Valuation and Qualifying Accounts II
All other schedules for Aon Corporation and Subsidiaries have been omitted
because the required information is not present in amounts sufficient to require
submission of the schedules or because the information required is included in
the respective financial statements or notes thereto.
The following supplementary schedules have been provided for Aon Corporation and
Subsidiaries as they relate to the insurance underwriting operations:
Schedule
--------
Summary of Investments Other than Investments in Related Parties II.1
Reinsurance II.2
Supplementary Insurance Information II.3
(A)(3). EXHIBITS
(a) Second Restated Certificate of Incorporation of the Registrant
- incorporated by reference to Exhibit 3(a) to the
Registrant's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1991
(the "1991 Form 10-K").
(b) Certificate of Amendment of the Registrant's Second Restated
Certificate of Incorporation - incorporated by reference to
Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1994 (the "First Quarter 1994
Form 10Q").
(c) Certificate of Amendment of the Registrant's Second Restated
Certificate of Incorporation - incorporated by reference to
Exhibit 3 to the Registrant's current Form 8-K, dated May 9,
2000.
(d) Amended Bylaws of the Registrant - incorporated by reference
to Exhibit 3(d) to the Registrant's Annual Report to the
Securities and Exchange Commission on Form 10-K for the year
ended December 31, 2000 (the "2000 Form 10-K").
(e) Indenture dated September 15, 1992 between the Registrant and
Continental Bank Corporation (now known as Bank of America
Illinois), as Trustee - incorporated by reference to Exhibit
4(a) to the Registrant's Current Report on Form 8-K dated
September 23, 1992.
(f) Resolutions establishing terms of 7.40% Notes Due 2002 -
incorporated by reference to Exhibits 4(d) to the Registrant's
Annual Report to the Securities and Exchange Commission on
Form 10-K for the year ended December 31, 1992 (the "1992 Form
10-K").
(g) Resolutions establishing the terms of 6.70% Notes Due 2003 and
6.30% Notes Due 2004 incorporated by reference to Exhibits
4(c) and 4(d) of the Registrant's Annual Report to the
Securities and Exchange Commission on Form 10-K for the year
ended December 31, 1993 (the "1993 Form 10-K").
(h) Resolutions establishing the terms of the 6.90% Notes Due
2004, incorporated by reference to Exhibit 4(e) of the
Registrant's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1999
(the "1999 Form 10-K").
(i) Resolutions establishing the terms of the 8.65% Notes due
2005, incorporated by reference to Exhibit 4(f) of the 2000
Form 10-K.
(j) Junior Subordinated Indenture dated as of January 13, 1997
between the Registrant and The Bank of New York, as trustee -
incorporated by reference to Exhibit 4.1 of the Registrant's
Amendment No. 1 to Registration Statement on Form S-4 No.
333-21237 dated March 27, 1997 (the "Capital Securities
Registration").
(k) First Supplemental Indenture dated as of January 13, 1997
between the Registrant and the Bank of New York, as trustee -
incorporated by reference to Exhibit 4.2 of the Capital
Securities Registration.
(l) Certificate of Trust of Aon Capital A - incorporated by
reference to Exhibit 4.3 of the Capital Securities
Registration.
(m) Amended and Restated Trust Agreement of Aon Capital A dated as
of January 13, 1997 among the Registrant, as Depositor, The
Bank of New York, as Property Trustee, The Bank of New York
(Delaware), as Delaware Trustee, the Administrative Trustees
named therein and the holders, from time to time, of the
Capital Securities - incorporated by reference to Exhibit 4.5
of the Capital Securities Registration.
(n) Capital Securities Guarantee Agreement dated as of January 13,
1997 between the Registrant and the Bank of New York, as
guarantee trustee - incorporated by reference to Exhibit 4.8
of the Capital Securities Registration.
(o) Capital Securities Exchange and Registration Rights Agreement
dated as of January 13, 1997 among the Registrant, Aon Capital
A and Morgan Stanley & Co. Incorporated and Goldman, Sachs &
Co. - incorporated by reference to Exhibit 4.10 of the Capital
Securities Registration.
(p) Debenture Exchange and Registration Rights Agreement dated as
of January 13, 1997 among the Registrant, Aon Capital A and
Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. -
incorporated by reference to Exhibit 4.11 of the Capital
Securities Registration.
(q) Guarantee Exchange and Registration Rights Agreement dated as
of January 13, 1997 among the Registrant, Aon Capital A and
Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. -
incorporated by reference to Exhibit 4.12 of the Capital
Securities Registration.
(r) Certificate of Designation for the Registrant's Series C
Cumulative Preferred Stock - incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K
dated February 9, 1994.
(s) Registration Rights Agreement dated November 2, 1992 by and
between the Registrant and Frank B. Hall & Co., Inc. -
incorporated by reference to Exhibit 4(c) to the Third Quarter
1992 Form 10-Q.
(t) Registration rights agreement by and among the Registrant and
certain affiliates of Ryan Insurance Group, Inc. (including
Patrick G. Ryan and Andrew J. McKenna) - incorporated by
reference to Exhibit (f) to the 1982 Form 10-K.
(u) Aon Corporation Outside Director Deferred Compensation
Agreement by and among the Registrant and Registrant's
directors who are not salaried employees of Registrant or
Registrant's affiliates.
(v) Amendment and Waiver Agreement dated as of November 4, 1991
among the Registrant and each of Patrick G. Ryan, Shirley
Ryan, Ryan Enterprises Corporation and Harvey N. Medvin -
incorporated by reference to Exhibit 10(j) to the 1991 Form
10-K.
(w) Statement regarding Computation of Ratio of Earnings to Fixed
Charges.
(x) Statement regarding Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends.
(y) Aon Corporation 1994 Amended and Restated Outside Director
Stock Award Plan - incorporated by reference to Exhibit 10(b)
to the First Quarter 1994 Form 10-Q.
(z) Annual Report to Stockholders of the Registrant for the year
ended December 31, 2001 (for information, and not to be deemed
filed, except for those portions specifically incorporated by
reference herein).
(aa) List of Subsidiaries of the Registrant.
(ab) Consent of Ernst & Young LLP to the incorporation by reference
into Aon's Annual Report on Form 10-K of its report included
in the 2001 Annual Report to Stockholders and into Aon's
Registration Statement Nos. 33-27984, 33-42575, 33-59037,
333-21237, 333-50607, 333-55773, 333-78723, 333-49300,
333-57706, 333-65624 and 333-74364.
(ac) Annual Report to the Securities and Exchange Commission on
Form 11-K for the Aon Savings Plan for the year ended December
31, 2001 - to be filed by amendment as provided in Rule 15d-
21(b).
(ad) Executive Compensation Plans and Arrangements:
(A) Aon Stock Award Plan (as amended and restated through
February 2000) - incorporated by reference to Exhibit
10 (a) to the Registrant's Quarterly Report to the
Securities and Exchange Commission on Form 10-Q for
the Quarter ended June 30, 2000 (the "Second Quarter
2000 Form 10-Q").
(B) Aon Stock Option Plan (as amended and restated
through 1997) - incorporated by reference to Exhibit
10(a) to the Registrant's Quarterly Report to the
Securities and Exchange Commission on Form 10-Q for
the quarter ended March 31, 1997 (the "First Quarter
1997 Form 10-Q").
(C) First Amendment to the Aon Stock Option Plan as
amended and restated through 1997 - incorporated by
reference to Exhibit 10(a) to the Registrant's
Quarterly Report to the Securities and Exchange
Commission on Form 10-Q for the Quarter ended March
31, 1999 (the "First Quarter 1999 Form 10-Q").
(D) Aon Stock Award Plan (as amended and restated through
1997) - incorporated by reference to Exhibit 10(b) to
the First Quarter 1997 Form 10-Q.
(E) First Amendment to the Aon Stock Award Plan as
Amended and Restated Through 1997 - incorporated by
reference to Exhibit 10(b) to the First Quarter 1999
Form 10-Q.
(F) Aon Corporation 1995 Senior Officer Incentive
Compensation Plan incorporated by reference to
Exhibit 10(p) to the Registrant's Annual Report to
the Securities and Exchange Commission on Form 10-K
for the year ended December 31, 1995 (the "1995 Form
10-K").
(G) Aon Deferred Compensation Plan and First Amendment to
the Aon Deferred Compensation Plan - incorporated by
reference to Exhibit 10(q) of the 1995 Form 10-K.
(H) 1999 Aon Deferred Compensation Plan incorporated by
reference to Exhibit 10(1) of the 1999 Form 10-K.
(I) Employment Agreement dated June 1, 1993 by and among
the Registrant, Aon Risk Services, Inc. and Michael
D. O'Halleran, incorporated by reference to Exhibit
10(p) to the Registrant's Annual Report to the
Securities and Exchange Commission on Form 10-K for
the year ended December 31, 1998.
(J) Aon Severance Plan - incorporated by reference to
Exhibit 10 to the Registrant's Quarterly Report to
the Securities and Exchange Commission and Form 10-Q
for the quarter ended June 30, 1997.
(ae) Asset Purchase Agreement dated July 24, 1992 between the
Registrant and Frank B. Hall & Co. Inc. - incorporated by
reference to Exhibit 10(c) to the Registrant's Quarterly
Report on Form 10- Q for the period ended June 30, 1992.
(af) Stock Purchase Agreement by and among the Registrant, Combined
Insurance Company of America, Union Fidelity Life Insurance
Company and General Electric Capital Corporation dated as of
November 11, 1995 - incorporated by reference to Exhibit 10(s)
of the 1995 Form 10-K.
(ag) Stock Purchase Agreement by and among the Registrant; Combined
Insurance Company of America; The Life Insurance Company of
Virginia; Forth Financial Resources, Ltd.; Newco Properties,
Inc.; and General Electric Capital Corporation dated as of
December 22, 1995 - incorporated by reference to Exhibit 10(t)
of the 1995 Form 10-K.
(ah) Agreement and Plan of Merger among the Registrant; Subsidiary
Corporation, Inc. ("Purchaser"); and Alexander & Alexander
Services Inc. ("A&A") dated as of December 11, 1996 -
incorporated by reference to Exhibit (c)(1) of the
Registrant's Tender Offer Statement on Schedule 14D-1 filed by
the Registrant with the Securities and Exchange Commission
("SEC") on December 16, 1996 (the "Schedule 14D-1").
(ai) First Amendment to Agreement and Plan of Merger, dated as of
January 7, 1997, among the Registrant, Purchaser and A&A -
incorporated by reference to Exhibit (c)(3) to the Schedule
14D-1 filed by the Registrant with the SEC on January 9, 1997.
(aj) Agreement and Plan of Merger dated July 16, 2001 among Aon
Corporation, Ryan Holding Corporation of Illinois, Ryan
Enterprises Corporation of Illinois, Holdco #1, Inc., Holdco
#2, Inc., Patrick G. Ryan, Shirley W. Ryan and the
stockholders of Ryan Holding Corporation of Illinois and of
Ryan Enterprises Corporation of Illinois set forth on the
signature pages thereto - incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report to the Securities
and Exchange Commission on Form 10-Q for the Quarter ended
June 30, 2001 (the "Second Quarter 2001 Form 10-Q").
(ak) Stock Restriction Agreement dated July 16, 2001 among Aon
Corporation, Patrick G. Ryan, Shirley W. Ryan, Patrick G. Ryan
Jr., Robert J.W. Ryan, the Corbett M.W. Ryan Living Trust
dated July 13, 2001, the Patrick G. Ryan Living Trust dated
July 10, 2001, the Shirley W. Ryan Living Trust dated July 10,
2001, the 2001 Ryan Annuity Trust dated April 20, 2001 and the
Family GST Trust under the PGR 2000 Trust dated November 22,
2000 - incorporated by reference to Exhibit 10.2 to the Second
Quarter 2001 Form 10-Q.
(al) Escrow Agreement dated July 16, 2001 among Aon Corporation,
Patrick G. Ryan, Shirley W. Ryan, Patrick G. Ryan, Jr., Robert
J.W. Ryan, the Corbett M. W. Ryan Living Trust dated July 13,
2001, the Patrick G. Ryan Living Trust dated July 10, 2001,
the Shirley W. Ryan Living Trust dated July 10, 2001, the 2001
Ryan Annuity Trust dated April 20, 2001 and the Family GST
Trust under the PGR 2000 Trust dated November 22, 2000 and
American National Bank and Trust Company of Chicago, as escrow
agent - incorporated by reference to Exhibit 10.3 to the
Second Quarter 2001 Form 10-Q.
(am) Indenture dated December 13, 2001, between the Registrant and
the Bank of New York as Trustee (Floating Rate Notes due
2003).
(an) Indenture dated December 13, 2001, between the Registrant and
the Bank of New York as Trustee (6.2% Notes due 2007).
(ao) Indenture dated December 31, 2001 between Private Equity
Partnerships Structure I, LLC, as issuer and the Bank of New
York as Trustee, Custodian, Calculation Agent, Note Registrar,
Transfer Agent and Paying Agent.
(B) REPORTS ON FORM 8-K.
During the quarter ended December 31, 2001, the Registrant
filed three Current Reports on Form 8-K.
(i) A Current Report on Form 8-K dated November 8, 2001
reporting its third quarter 2001 results and updating
the status of its business transformation plan, the
impact of September 11, 2001 attacks and spin-off
plans.
(ii) A Current Report on Form 8-K dated December 3, 2001
reporting pro-forma financial statements relating to
previously announced plans to spin-off its insurance
underwriting operations.
(iii) A Current Report on Form 8-K dated December 4, 2001
announcing that the Company had filed a $750 million
universal shelf registration with the Securities and
Exchange Commission.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 15TH DAY OF
MARCH, 2002.
Aon Corporation
By: /s/ PATRICK G. RYAN
----------------------------
Patrick G. Ryan, Chairman
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ PATRICK G. RYAN Chairman, Chief Executive March 15, 2002
- ---------------------------------------- Officer and Director
Patrick G. Ryan (Principal Executive Officer)
/s/ FRANKLIN A. COLE Director March 15, 2002
- ----------------------------------------
Franklin A. Cole
/s/ EDGAR D. JANNOTTA Director March 15, 2002
- ----------------------------------------
Edgar D. Jannotta
/s/ LESTER B. KNIGHT Director March 15, 2002
- ----------------------------------------
Lester B. Knight
/s/ PERRY J. LEWIS Director March 15, 2002
- ----------------------------------------
Perry J. Lewis
/s/ ANDREW J. McKENNA Director March 15, 2002
- ----------------------------------------
Andrew J. McKenna
/s/ ROBERT S. MORRISON Director March 15, 2002
- ----------------------------------------
Robert S. Morrison
/s/ RICHARD C. NOTEBAERT Director March 15, 2002
- ----------------------------------------
Richard C. Notebaert
/s/ MICHAEL D. O'HALLERAN Director March 15, 2002
- ----------------------------------------
Michael D. O'Halleran
SIGNATURE TITLE DATE
--------- ----- ----
/s/ DONALD S. PERKINS Director March 15, 2002
- ----------------------------------------
Donald S. Perkins
/s/ JOHN W. ROGERS, JR. Director March 15, 2002
- ----------------------------------------
John W. Rogers, Jr.
/s/ GEORGE A. SCHAEFER Director March 15, 2002
- ----------------------------------------
George A. Schaefer
/s/ RAYMOND I. SKILLING Director March 15, 2002
- ----------------------------------------
Raymond I. Skilling
/s/ FRED L. TURNER Director March 15, 2002
- ----------------------------------------
Fred L. Turner
/s/ ARNOLD R. WEBER Director March 15, 2002
- ----------------------------------------
Arnold R. Weber
/s/ CAROLYN Y. WOO Director March 15, 2002
- ----------------------------------------
Carolyn Y. Woo
/s/ HARVEY N. MEDVIN Executive Vice President March 15, 2002
- ---------------------------------------- and Chief Financial Officer
Harvey N. Medvin (Principal Financial and Accounting
Officer)
SCHEDULE I
Aon Corporation
(PARENT COMPANY)
CONDENSED STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31
-----------------------------------
(millions) 2001 2000
---------------- ----------------
ASSETS
Investments in subsidiaries $ 6,608 $ 6,127
Other investments 20 -
Notes receivable - subsidiaries 58 515
Cash and cash equivalents 4 1
Other assets 39 111
---------------- ----------------
TOTAL ASSETS $ 6,729 $ 6,754
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Short-term borrowings $ 254 $ 853
6.3% long-term debt securities 100 100
7.4% long-term debt securities 100 100
8.65% long-term debt securities 250 250
6.9% long-term debt securities 250 250
6.7% long-term debt securities 150 150
6.2% long-term debt securities 250 -
Floating rate long-term debt securities 150 -
Subordinated debt 800 800
Notes payable - subsidiaries 595 571
Notes payable - other 70 70
Accrued expenses and other liabilities 189 172
---------------- ----------------
TOTAL LIABILITIES 3,158 3,316
---------------- ----------------
Redeemable Preferred Stock 50 50
STOCKHOLDERS' EQUITY
Common stock 293 264
Paid-in additional capital 1,654 706
Accumulated other comprehensive loss (535) (377)
Retained earnings 3,077 3,127
Less treasury stock at cost (786) (118)
Less deferred compensation (182) (214)
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 3,521 3,388
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,729 $ 6,754
================ ================
See notes to condensed financial statements.
SCHEDULE I
(CONTINUED)
Aon Corporation
(PARENT COMPANY)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31
---------------------------------------
(MILLIONS) 2001 2000 1999
----------- ----------- -----------
REVENUE
Dividends from subsidiaries $ 333 $ 379 $ 467
Other investment income 1 9 20
----------- ----------- -----------
TOTAL REVENUE 334 388 487
----------- ----------- -----------
EXPENSES
Operating and administrative 14 22 13
Interest - subsidiaries 93 103 96
Interest - other 107 122 85
----------- ----------- -----------
TOTAL EXPENSES 214 247 194
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND EQUITY (DEFICIT) IN
UNDISTRIBUTED INCOME OF SUBSIDIARIES 120 141 293
Income tax benefit 85 95 70
----------- ----------- -----------
205 236 363
EQUITY (DEFICIT) IN UNDISTRIBUTED INCOME OF SUBSIDIARIES (2) 238 (11)
----------- ----------- -----------
NET INCOME $ 203 $ 474 $ 352
=========== =========== ===========
See notes to condensed financial statements
SCHEDULE I
(CONTINUED)
Aon Corporation
(PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31
--------------------------------------------
(MILLIONS) 2001 2000 1999
------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES $ 170 $ 137 $ 287
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in subsidiaries (24) (124) (363)
Other investments (20) - -
Notes receivables from subsidiaries 60 (40) (208)
------------- ------------ ------------
CASH PROVIDED (USED) BY INVESTING ACTIVITIES 16 (164) (571)
------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury stock transactions - net 49 (59) (66)
Issuance (repayment) of short-term borrowings - net (599) 30 387
Issuance of notes payable and long-term debt 608 266 284
Repayment of long-term debt - - (100)
Cash dividends to stockholders (241) (226) (210)
------------- ------------ ------------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES (183) 11 295
------------- ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3 (16) 11
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1 17 6
------------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4 $ 1 $ 17
============= ============ ============
See notes to condensed financial statements
SCHEDULE I
(CONTINUED)
Aon Corporation
(Parent Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) See notes to consolidated financial statements incorporated by
reference from the 2001 Annual Report.
(2) Generally, the net assets of Aon's insurance subsidiaries available for
transfer to the parent company are limited to the amounts that the
insurance subsidiaries' statutory net assets exceed minimum statutory
capital requirements; however, payments of the amounts as dividends in
excess of $101 million may be subject to approval by regulatory
authorities.
(3) In 2001, Aon entered into a new committed bank credit facility under
which certain European subsidiaries can borrow up to EUR 500 million.
At December 31, 2001, loans of EUR 269 million ($239 million) were
outstanding under this facility.
An indirect wholly-owned subsidiary of Aon Corporation manages various
investment portfolios, totaling $249 million at December 31, 2001, held
in a collateral trust for the benefit of certain unaffiliated entities
and is obligated to produce specified investment returns for those
portfolios. Aon Corporation has unconditionally guaranteed the
obligations of this subsidiary.
(4) In 2001, the Condensed Statements of Cash Flows exclude the impact of
certain non-cash transfers primarily related to notes receivable from
subsidiaries and notes payable to subsidiaries.
(5) During 2001, Aon Corporation (Parent Company) reclassified $520 million
of notes receivable - subsidiaries to investments in subsidiaries
related to its shared services operations.
SCHEDULE II
AON CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000 and 1999
(millions) ADDITIONS
-------------------------------
CHARGED/
BALANCE AT CHARGED TO (CREDITED) BALANCE
beginning COST AND TO OTHER DEDUCTIONS AT END
Description of year EXPENSES ACCOUNTS (1) OF YEAR
- ------------------------------------------------------------- --------------- ------------- --------------- ---------------
YEAR ENDED DECEMBER 31, 2001
- ----------------------------
Allowance for doubtful accounts (2)
(deducted from insurance brokerage
and consulting receivables) $ 88 $ 30 $ (2) $ (23) $ 93
Allowance for doubtful accounts
(deducted from premiums and other) 4 - - - 4
YEAR ENDED DECEMBER 31, 2000
- ----------------------------
Allowance for doubtful accounts (2)
(deducted from insurance brokerage
and consulting receivables) $ 88 $ 19 $ (2) $ (17) $ 88
Allowance for doubtful accounts
(deducted from premiums and other) 6 - - (2) 4
YEAR ENDED DECEMBER 31, 1999
- ----------------------------
Allowance for doubtful accounts (2)
(deducted from insurance brokerage
and consulting receivables) 93 12 (3) (14) 88
Allowance for doubtful accounts
(deducted from premiums and other) 6 1 - (1) 6
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Amounts deemed to be uncollectible.
(2) Amounts shown in additions charged/(credited) to other accounts
primarily represent reserves related to acquired business and foreign
exchange.
</FN>
SCHEDULE II.1
AON CORPORATION AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
AS OF DECEMBER 31, 2001
AMOUNT SHOWN
IN STATEMENT
AMORTIZED FAIR OF FINANCIAL
(millions) COST OR COST VALUE POSITION
---------------- ---------------- -------------------
FIXED MATURITIES - AVAILABLE FOR SALE:
U.S. government and agencies $ 355 $ 361 $ 361
States and political subdivisions 3 3 3
Debt securities of foreign governments
not classified as loans 515 521 521
Corporate securities 1,169 1,131 1,131
Public utilities 74 72 72
Mortgage-backed securities 42 42 42
Other fixed maturities 19 19 19
---------------- ---------------- -------------------
TOTAL FIXED MATURITIES 2,177 2,149 2,149
---------------- ---------------- -------------------
EQUITY SECURITIES - AVAILABLE FOR SALE:
Common stocks:
Banks, trusts and insurance companies 79 68 68
Industrial, miscellaneous and all other 60 53 53
Non-redeemable preferred stocks 286 261 261
---------------- ---------------- -------------------
TOTAL EQUITY SECURITIES 425 382 382
---------------- ---------------- -------------------
Mortgage loans on real estate 3 * 3 *
Policy loans 51 * 51 *
Other long-term investments 583 * 586 *
Short-term investments 2,975 2,975
---------------- -------------------
TOTAL INVESTMENTS $ 6,214 $ 6,146
================ ===================
<FN>
* These investment categories are combined and are shown as other
investments in the Consolidated Statements of Financial Position
</FN>
SCHEDULE II.2
AON CORPORATION AND SUBSIDIARIES
REINSURANCE
YEAR ENDED DECEMBER 31, 2001
-------------------------------------------------------------------------------------
(millions) CEDED TO ASSUMED PERCENTAGE OF
GROSS OTHER FROM OTHER AMOUNT
AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET
-------------------------------------------------------------------------------------
LIFE INSURANCE IN FORCE $ 20,265 $ 13,660 $ 11,189 $ 17,794 63%
============== ============== ============== ============== =================
PREMIUMS
Life Insurance $ 198 $ 110 $ 76 $ 164 46%
A&H Insurance 1,293 329 222 1,186 19%
Specialty Property & Casualty 1,061 482 93 672 14%
-------------- -------------- -------------- -------------- -----------------
TOTAL PREMIUMS $ 2,552 $ 921 $ 391 $ 2,022 19%
============== ============== ============== ============== =================
YEAR ENDED DECEMBER 31, 2000
-------------------------------------------------------------------------------------
(millions) CEDED TO ASSUMED PERCENTAGE OF
GROSS OTHER FROM OTHER AMOUNT
AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET
-------------------------------------------------------------------------------------
LIFE INSURANCE IN FORCE $ 18,803 $ 9,442 $ 9,367 $ 18,728 50%
============== ============== ============== ============== =================
PREMIUMS
Life Insurance $ 198 $ 156 $ 102 $ 144 71%
A&H Insurance 1,209 309 189 1,089 17%
Specialty Property & Casualty 965 380 88 673 13%
-------------- -------------- -------------- -------------- -----------------
TOTAL PREMIUMS $ 2,372 $ 845 $ 379 $ 1,906 20%
============== ============== ============== ============== =================
YEAR ENDED DECEMBER 31, 1999
-------------------------------------------------------------------------------------
(millions) CEDED TO ASSUMED PERCENTAGE OF
GROSS OTHER FROM OTHER AMOUNT
AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET
-------------------------------------------------------------------------------------
LIFE INSURANCE IN FORCE $ 14,444 $ 10,023 $ 3,050 $ 7,471 41%
============== ============== ============== ============== =================
PREMIUMS
Life Insurance $ 227 $ 93 $ 2 $ 136 1%
A&H Insurance 1,167 257 91 1,001 9%
Specialty Property & Casualty 860 274 85 671 13%
-------------- -------------- -------------- -------------- -----------------
TOTAL PREMIUMS $ 2,254 $ 624 $ 178 $ 1,808 10%
============== ============== ============== ============== =================
SCHEDULE II.3
AON CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(millions)
FUTURE POLICY UNEARNED
DEFERRED BENEFITS, PREMIUMS AND
POLICY LOSSES, CLAIMS OTHER NET
ACUISITION AND LOSS POLICYHOLDERS' PREMIUM INVESTMENT
COSTS EXPENSES FUNDS(3) REVENUE INCOME(1)
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2001
----------------------------
Insurance brokerage and other services $ - $ - $ - $ - $ 156
Consulting - - - - 5
Insurance underwriting 704 1,963 3,027 2,022 223
Corporate and other - - - - (171)
---------- ----------- ---------- ----------- -----------
TOTAL $ 704 $ 1,963 $ 3,027 $ 2,022 $ 213
========== =========== ========== =========== ===========
YEAR ENDED DECEMBER 31, 2000
----------------------------
Insurance brokerage and other services $ - $ - $ - $ - $ 186
Consulting - - - - 6
Insurance underwriting 656 1,855 3,122 1,906 245
Corporate and other - - - - 71
---------- ----------- ---------- ----------- -----------
TOTAL $ 656 $ 1,855 $ 3,122 $ 1,906 $ 508
========== =========== ========== =========== ===========
YEAR ENDED DECEMBER 31, 1999
----------------------------
Insurance brokerage and other services $ - $ - $ - $ - $ 159
Consulting - - - - 3
Insurance underwriting 636 1,769 3,337 1,808 251
Corporate and other - - - - 164
---------- ----------- ---------- ----------- ----------
TOTAL $ 636 $ 1,769 $ 3,337 $ 1,808 $ 577
========== =========== ========== =========== ==========
<FN>
(1) The above results reflect allocations of investment income and certain
expense elements considered reasonable under the circumstances. Results
include income (loss) on disposals of investments.
(2) Net of reinsurance ceded.
(3) 2000 and 1999 were restated to conform with the 2001 presentation.
</FN>
AON CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(Continued)
(millions)
BENEFITS AMORTIZATION
CLAIMS, LOSSES OF DEFERRED
AND POLICY OTHER
COMMISSIONS, SETTLEMENT ACQUISITION OPERATING PREMIUMS
FEES AND OTHER ENPENSES COSTS EXPENSES WRITTEN(2)
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2001
----------------------------
Insurance brokerage and other services $ 4,503 $ - $ - $ 4,135 $ -
Consulting 933 - - 812 -
Insurance underwriting 5 1,111 217 682 1,966
Corporate and other - - - 320 -
------------ ---------- ----------- ----------- ----------
TOTAL $ 5,441 $ 1,111 $ 217 $ 5,949 $ 1,966
============ ========== =========== =========== ==========
YEAR ENDED DECEMBER 31, 2000
----------------------------
Insurance brokerage and other services $ 4,181 $ - $ - $ 3,677 $ -
Consulting 764 - - 664 -
Insurance underwriting 16 1,037 215 615 1,887
Corporate and other - - - 313 -
------------ ---------- ----------- ----------- ----------
TOTAL $ 4,961 $ 1,037 $ 215 $ 5,269 $ 1,887
============ ========== =========== =========== ==========
YEAR ENDED DECEMBER 31, 1999
----------------------------
Insurance brokerage and other services $ 3,985 $ - $ - $ 3,651 $ -
Consulting 653 - - 698 -
Insurance underwriting 47 973 247 596 1,787
Corporate and other - - - 270 -
------------ ---------- ----------- ----------- ----------
TOTAL $ 4,685 $ 973 $ 247 $ 5,215 $ 1,787
============ ========== =========== =========== ==========
<FN>
(1) The above results reflect allocations of investment income and certain
expense elements considered reasonable under the circumstances. Results
include income (loss) on disposals of investments.
(2) Net of reinsurance ceded.
(3) 2000 and 1999 were restated to conform with the 2001 presentation.
</FN>
Cross Reference Sheet, Pursuant
to General Instruction G(4)
ITEM IN FORM 10-K INCORPORATED BY REFERENCE TO
- ----------------- ----------------------------
Part I
- ------
Item 1. Business Annual Report to Stockholders of the
Registrant for the Year 2001 ("Annual
Report") pages 6 through 15, 23 through 27,
and pages 43, 58, 59 and 63.
Item 3. Legal Proceedings Annual Report page 57 (note 15 of Notes to
Consolidated Financial Statements).
Part II
- -------
Item 5. Market for the Registrant's Common Stock Annual Report pages 48 and 49 (note 11 of
and Related Security Holder Matters Notes to Consolidated Financial Statements)
and page 61 ("Dividends paid per share" and
"Price range").
Item 6. Selected Financial Data Annual Report page 61.
Item 7. Management's Discussion and Analysis of Annual Report pages 18 through 31.
Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosures Annual Report page 31 ("Market Risk Exposure").
about Market Risk
Item 8. Financial Statements, Report by Independent Annual Report pages 32 through 60 and 62.
Auditors and Supplementary Data
Part III
- --------
Item 10. Directors and Executive Officers of the Proxy Statement For Annual Meeting of Stockholders
Registrant on April 19, 2002 of the Registrant ("Proxy
Statement") pages 3, 6, 7, 10 and 11.
Item 11. Executive Compensation Proxy Statement pages 14 through 17.
Item 12. Security Ownership of Certain Beneficial Proxy Statement pages 2, 8 and 9.
Owners and Management
Item 13. Certain Relationships and Related Proxy Statement pages 21 and 22 ("Transactions With
Transaction Management").
Part IV
- -------
Item 14. Exhibits, Financial Statement Schedules, Annual Report pages 32 through 60 and 62.
Reports on Form 8-K and Report by
Independent Auditors
EXHIBIT INDEX
Exhibit Number Page Number of
Regulation Sequentially
S-K, Item 601 Numbered Copy
- ------------- -------------
(3) Articles of incorporation and bylaws:
(a) Second Restated Certificate of Incorporation of the Registrant -
incorporated by reference to Exhibit 3(a) to the 1991 Form 10-K.
(b) Certificate of Amendment of the Registrant's Second Restated
Certificate of Incorporation - incorporated by reference to Exhibit
3 to the First Quarter 1994 Form 10-Q.
(c) Certificate of Amendment of the Registrant's Second Restated
Certificate of Incorporation - incorporated by reference to Exhibit
3 to the Registrant's current Form 8-K, dated May 9, 2000.
(d) Amended Bylaws of the Registrant - incorporated by reference to
Exhibit 3(d) to the Registrant's Annual Report to the Securities and
Exchange Commission on Form 10-K for the year ended December 31,
2000 (the "2000 Form 10-K").
(e) Certificate of Designation for the Registrant's Series C Cumulative
Preferred Stock - incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated February 9, 1994.
(4) Instruments defining the rights of security holders, including indentures:
(a) Indenture dated September 15, 1992 between the Registrant and
Continental Bank Corporation (now known as Bank of America
Illinois), as Trustee - incorporated by reference to Exhibit 4(a) of
the Registrant's Current Report on Form 8-K dated September 23,
1992.
(b) Resolutions establishing terms of 7.40% Notes Due 2002 -
incorporated by reference to Exhibit 4(d) to the 1992 Form 10-K.
(c) Resolutions establishing the terms of 6.70% Notes Due 2003
incorporated by reference to Exhibit 4(c) to the 1993 Form 10-K.
(d) Resolutions establishing the terms of 6.30% Notes Due 2004
incorporated by reference to Exhibit 4(d) to the 1993 Form 10-K.
(e) Resolutions establishing the terms of 6.90% Notes due 2004
incorporated by reference to Exhibit 4(e) to the 1999 Form 10-K.
(f) Resolutions establishing the terms of 8.65% Notes due 2005 -
incorporated by reference to Exhibits 4(f) to the 2000 Form 10-K.
(g) Indenture dated December 13, 2001, between the Registrant and the
Bank of New York as Trustee (Floating Rate Notes due 2003).
(h) Indenture dated December 13, 2001, between the Registrant and the
Bank of New York as Trustee (6.2% Notes due 2007).
EXHIBIT INDEX
Exhibit Number Page Number of
Regulation Sequentially
S-K, Item 601 Numbered Copy
- ------------- -------------
(i) Indenture dated December 31, 2001 between Private Equity Partnerships
Structure I, LLC, as issuer and the Bank of New York as Trustee,
Custodian, Calculation Agent, Note Registrar, Transfer Agent and
Paying Agent.
(j) Junior Subordinated Indenture dated as of January 13, 1997 between
the Registrant and The Bank of New York, as trustee - incorporated
by reference to Exhibit 4.1 of the Registrant's Amendment No. 1 to
Registration Statement on Form S-4 No. 333-21237 dated March 27,
1997 (the "Capital Securities Registration").
(k) First Supplemental Indenture dated as of January 13, 1997 between
the Registrant and the Bank of New York, as trustee - incorporated
by reference to Exhibit 4.2 of the Capital Securities Registration.
(l) Certificate of Trust of Aon Capital A - incorporated by reference to
Exhibit 4.3 of the Capital Securities Registration.
(m) Amended and Restated Trust Agreement of Aon Capital A dated as of
January 13, 1997 among the Registrant, as Depositor, The Bank of New
York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, the Administrative Trustees named therein and the
holders, from time to time, of the Capital Securities - incorporated
by reference to Exhibit 4.5 of the Capital Securities Registration.
(n) Capital Securities Guarantee Agreement dated as of January 13, 1997
between the Registrant and the Bank of New York, as guarantee
trustee - incorporated by reference to Exhibit 4.8 of the Capital
Securities Registration.
(o) Capital Securities Exchange and Registration Rights Agreement dated
as of January 13, 1997 among the Registrant, Aon Capital A and
Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. -
incorporated by reference to Exhibit 4.10 of the Capital Securities
Registration.
(p) Debenture Exchange and Registration Rights Agreement dated as of
January 13, 1997 among the Registrant, Aon Capital A and Morgan
Stanley & Co. Incorporated and Goldman, Sachs & Co. - incorporated
by reference to Exhibit 4.11 of the Capital Securities Registration.
(q) Guarantee Exchange and Registration Rights Agreement dated as of
January 13, 1997 among the Registrant, Aon Capital A and Morgan
Stanley & Co. Incorporated and Goldman, Sachs & Co. - incorporated
by reference to Exhibit 4.12 of the Capital Securities Registration.
EXHIBIT INDEX
Exhibit Number Page Number of
Regulation Sequentially
S-K, Item 601 Numbered Copy
- ------------- -------------
(10) Material Contracts:
(a) Aon Stock Option Plan (as amended and restated through February
2000) - incorporated by reference to Exhibit 10(a) to the
Registrant's Quarterly Report to the Securities and Exchange
Commission on Form 10-Q for the quarter June 30, 2000 (the "Second
Quarter 2000 Form 10-Q").
(b) Aon Stock Option Plan (as amended and restated through 1997) -
incorporated by reference to Exhibit 10(a) to the Registrant's
Quarterly Report to the Securities and Exchange Commission on Form
10-Q for the quarter ended March 31, 1997 (the "First Quarter 1997
Form 10-Q").
(c) First Amendment to the Aon Stock Option Plan as Amended and Restated
Through 1997 - incorporated by reference to Exhibit 10(a) to the
Registrant's Quarterly Report to the Securities and Exchange
Commission on Form 10-Q for the quarter ended March 31, 1999 (the
"First Quarter 1999 Form 10-Q").
(d) Registration Rights Agreement by and among the Registrant and
certain affiliates of Ryan Insurance Group, Inc. (Including Patrick
G. Ryan and Andrew J. McKenna) - incorporated by reference to
Exhibit (f) to the 1982 Form 10-K.
(e) Aon Corporation Outside Director Deferred Compensation Agreement by
and among Registrant and Registrant's directors who are not salaried
employees of Registrant or Registrant's affiliates.
(f) Aon Stock Award Plan (as amended and restated through 1997) -
incorporated by reference to Exhibit 10(b) to the First Quarter 1997
Form 10-Q.
(g) First Amendment to the Aon Stock Award Plan as Amended and Restated
Through 1997 - incorporated by reference to exhibit 10(b) to the
First Quarter 1999 Form 10-Q.
(h) Amendment and Waiver Agreement dated as of November 4, 1991 among
the Registrant and each of Patrick G. Ryan, Shirley Ryan, Ryan
Enterprises Corporation and Harvey N. Medvin - incorporated by
reference to Exhibit 10(j) to the 1991 Form 10-K.
(i) Registration Rights Agreement dated November 2, 1992 by and between
the Registrant and Frank B. Hall & Co., Inc. - incorporated by
reference to Exhibit 4(c) to the Third Quarter 1992 Form 10-Q.
(j) Aon Corporation 1994 Amended and Restated Outside Director Stock
Award Plan - incorporated by reference to Exhibit 10(b) to the First
Quarter 1994 Form 10-Q.
EXHIBIT INDEX
Exhibit Number Page Number of
Regulation Sequentially
S-K, Item 601 Numbered Copy
- ------------- -------------
(k) Aon Corporation 1995 Senior Officer Incentive Compensation Plan -
incorporated by reference to Exhibit 10(p) to the 1995 Form 10-K.
(l) Aon Deferred Compensation Plan and First Amendment to the Aon
Deferred Compensation Plan - incorporated by reference to Exhibit
10(q) to the 1995 Form 10-K.
(m) 1999 Aon Deferred Compensation Plan incorporated by reference to
Exhibit 10(1) of the 1999 Form 10-K.
(n) Aon Severance Plan - incorporated by reference to Exhibit 10 to the
Registrant's Quarterly Report to the Securities and Exchange
Commission on Form 10-Q for the quarter ended June 30, 1997.
(o) Asset Purchase Agreement dated July 24, 1992 between the Registrant
and Frank B. Hall & Co. Inc. - incorporated by reference to Exhibit
10(c) to the Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1992.
(p) Stock Purchase Agreement by and among the Registrant, Combined
Insurance Company of America, Union Fidelity Life Insurance Company
and General Electric Capital Corporation dated as of November 11,
1995 - incorporated by reference to Exhibit 10(s) of the 1995 Form
10-K.
(q) Stock Purchase Agreement by and among the Registrant; Combined
Insurance Company of America; The Life Insurance Company of
Virginia; Forth Financial Resources, Ltd.; Newco Properties, Inc.;
and General Electric Capital Corporation dated as of December 22,
1995 - incorporated by reference to Exhibit 10(t) to the 1995 Form
10-K.
(r) Agreement and Plan of Merger among the Registrant, Purchaser and A&A
dated as of December 11, 1996 - incorporated by reference to Exhibit
(c)(1) to the Registrant's Schedule 14D-1 filed with the SEC on
December 16, 1996.
(s) First Amendment to Agreement and Plan of Merger dated as of January
7, 1997 among the Registrant, Purchaser and A&A - incorporated by
reference to Exhibit (c)(3) to Schedule 14D-1 filed by the
Registrant with the SEC on January 9, 1997.
(t) Employment Agreement dated June 1, 1993 by and among the Registrant,
Aon Risk Services, Inc. and Michael D. O'Halleran, incorporated by
reference to Exhibit 10(p) to the Registrant's Annual Report to the
Securities and Exchange Commission on Form 10-K for the year ended
December 31, 1998.
EXHIBIT INDEX
Exhibit Number Page Number of
Regulation Sequentially
S-K, Item 601 Numbered Copy
- ------------- -------------
(u) Agreement and Plan of Merger dated July 16, 2001 among Aon
Corporation, Ryan Holding Corporation of Illinois, Ryan Enterprises
Corporation of Illinois, Holdco #1, Inc., Holdco #2, Inc., Patrick
G. Ryan, Shirley W. Ryan and the stockholders of Ryan Holding
Corporation of Illinois and of Ryan Enterprises Corporation of
Illinois set forth on the signature pages thereto - incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly Report to
the Securities and Exchange Commission on Form 10-Q for the Quarter
ended June 30, 2001 (the "Second Quarter 2001 Form 10-Q").
(v) Stock Restriction Agreement dated July 16, 2001 among Aon
Corporation, Patrick G. Ryan, Shirley W. Ryan, Patrick G. Ryan Jr.,
Robert J.W. Ryan, the Corbett M.W. Ryan Living Trust dated July 13,
2001, the Patrick G. Ryan Living Trust dated July 10, 2001, the
Shirley W. Ryan Living Trust dated July 10, 2001, the 2001 Ryan
Annuity Trust dated April 20, 2001 and the Family GST Trust under
the PGR 2000 Trust dated November 22, 2000 - incorporated by
reference to Exhibit 10.2 to the Second Quarter 2001 Form 10-Q.
(w) Escrow Agreement dated July 16, 2001 among Aon Corporation, Patrick
G. Ryan, Shirley W. Ryan, Patrick G. Ryan, Jr., Robert J.W. Ryan,
the Corbett M. W. Ryan Living Trust dated July 13, 2001, the Patrick
G. Ryan Living Trust dated July 10, 2001, the Shirley W. Ryan Living
Trust dated July 10, 2001, the 2001 Ryan Annuity Trust dated April
20, 2001 and the Family GST Trust under the PGR 2000 Trust dated
November 22, 2000 and American National Bank and Trust Company of
Chicago, as escrow agent - incorporated by reference to Exhibit 10.3
to the Second Quarter 2001 Form 10-Q.
(12) Statements regarding Computation of Ratios.
(a) Statement regarding Computation of Ratio of Earnings to Fixed
Charges.
(b) Statement regarding Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends.
(13) Annual Report to Stockholders of the Registrant for the year ended
December 31, 2001.
(21) List of subsidiaries of the Registrant.
(23) Consent of Ernst & Young LLP to the incorporation by reference into Aon's
Annual Report on Form 10-K of their report included in the 2001 Annual
Report to Stockholders and into Aon's Registration Statement Nos.
33-27984, 33-42575, 33-59037, 333-21237, 333-50607, 333-55773, 333-78723,
333-49300, 333-57706, 333-65624 and 333-74364.
EXHIBIT INDEX
Exhibit Number Page Number of
Regulation Sequentially
S-K, Item 601 Numbered Copy
- ------------- -------------
(99) Annual Report to the Securities and Exchange Commission on Form 11-K for
the Aon Savings Plan for the year ended December 31, 2001 - to be filed by
amendment as provided in Rule 15d-21(b).