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Aon Reports First Quarter 2010 Results

04/03/2010

--First Quarter Highlights
- Total revenue increased 3% to $1.9 billion with a decline in organic revenue of 3%
- EPS from continuing operations was $0.63 and adjusted EPS from continuing operations, excluding certain items, increased 11% to $0.83
- Brokerage revenue increased 3% to $1.6 billion with a decline in organic revenue of 3%
- Brokerage operating margin was 16.2% and the adjusted operating margin, excluding certain items, was similar to the prior year quarter at 20.5%
- Consulting revenue increased 4% to $322 million with a decline in organic revenue of 1%
- Consulting operating margin was 15.2% and the adjusted operating margin, excluding certain items, increased 60 basis points to 17.4%
- Repurchased 1.2 million shares of common stock for $50 million
- Completed acquisition of J.P. Morgan Compensation and Benefits Strategies Division of J.P. Morgan Retirement Plan Services, LLC

CHICAGO, April 30, 2010 /PRNewswire via COMTEX/ --Aon Corporation (NYSE: AON) today reported results for the first quarter ended March 31, 2010.

Net income attributable to Aon stockholders was $178 million or $0.63 per share, compared to $280 million or $0.96 per share for the prior year quarter. The prior year quarter included an $83 million pretax gain related to the U.S. pension curtailment and a $43 million after-tax gain on the sale of Automobile Insurance Specialists (AIS). Net income attributable to Aon stockholders from continuing operations decreased 23% to $178 million or $0.63 per share, compared to $230 million or $0.79 per share for the prior year quarter. Net income attributable to Aon stockholders from continuing operations per share, excluding certain items, increased 11% to $0.83 compared to $0.75 for the prior year quarter. Certain items that impacted first quarter results and comparisons with the prior year quarter are detailed in the reconciliation of non-GAAP measures on page 12 of this press release.

"Our first quarter results reflect solid operational performance across both the Brokerage and Consulting segments. Despite difficult economic and soft market conditions and a 48 percent decline in investment income, on an adjusted basis, we held total operating margins constant and increased EPS from continuing operations 11 percent," said Greg Case, president and chief executive officer. "Our restructuring programs are expected to deliver additional cost savings and margin improvement, while the substantial investments across our organization in areas such as construction, professional liability and retirement consulting continue to strengthen our client-serving capability. Finally, our balance sheet and strong cash flow provide significant financial flexibility to create long-term shareholder value, as highlighted by the repurchase of an additional $50 million of stock during the quarter."

FIRST QUARTER FINANCIAL SUMMARY

Totalrevenue increased 3% to $1.9 billion from the prior year quarter due to a 6% increase from foreign currency translation and a 1% increase from acquisitions, primarily Allied North America, net of dispositions, partially offset by a 3% organic revenue decline in commissions and fees and a $12 million or 48% decline in investment income.

Total operating expenses increased 10% or $151 million to $1.6 billion due primarily to an estimated $92 million unfavorable impact from foreign currency translation and a $33 million increase in restructuring related expenses, partially offset by benefits related to the 2007 and Aon Benfield restructuring programs. The prior year quarter expenses included an $83 million pension curtailment gain.

Restructuring expenses were $76 million in the first quarter compared to $43 million in the prior year quarter. An analysis of restructuring-related expenses by segment and type for both the 2007 and Aon Benfield restructuring programs are detailed on page 13 of this release.

Restructuring savings in the first quarter related to the 2007 restructuring program are estimated at $110 million compared to $41 million in the prior year quarter. Of the estimated restructuring savings in the first quarter, $92 million were related to the Brokerage segment primarily from workforce reductions. Before any potential reinvestment of savings, the 2007 restructuring program is expected to deliver $536 million of annualized run-rate cost savings by the end of 2010.

Restructuring savings in the first quarter related to the Aon Benfield restructuring program are estimated at $22 million. Before any potential reinvestment of savings, the Benfield restructuring program is expected to deliver cumulative cost savings of $90-100 million in 2010 and $122 million in 2011.

Currency fluctuations in the first quarter favorably impacted net income from continuing operations by $0.04 per diluted share when the Company translates prior year quarter results at current quarter foreign exchange rates.

Effective tax rate on net income from continuing operations decreased to 24.9% in the first quarter compared to 31.5% for the prior year quarter. The first quarter was favorably impacted by certain deferred tax adjustments. The prior year quarter reflected an underlying tax rate on operations of approximately 29%, plus the impact of a non-cash deferred tax expense on the U.S. pension curtailment gain. The Company anticipates an underlying effective tax rate on continuing operations of 28% for 2010.

Average diluted shares outstanding decreased to 283.4 million in the first quarter compared to 292.0 million in the prior year quarter due primarily to the Company's share repurchase program. During the quarter, the Company repurchased 1.2 million shares of common stock for $50 million. The company has approximately $215 million remaining under the share repurchase program previously authorized in 2005 and $2 billion under the share repurchase program previously authorized in 2010.

Discontinued Operations after-tax income had no impact on results in the first quarter compared to an after-tax gain of $50 million or $0.17 per share in the prior year quarter. The prior year quarter primarily includes a $43 million after-tax gain on the sale of AIS.

FIRST QUARTER SEGMENT REVIEW

Certain noteworthy items impacted operating income and operating margins in the first quarter of 2010 and 2009. The first quarter segment reviews provided below include supplemental information related to organic revenue growth, adjusted operating income and operating margin which is described in detail on the "Reconciliation of Non-GAAP Measures - Organic Revenue Growth" on page 11 and "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings Per Share" on page 12 of this press release.

    RISK AND INSURANCE BROKERAGE SERVICES

    (millions)           First Quarter Ended
                         -------------------
    Commissions,      Mar 31,       Mar 31,         %
    Fees and Other        2010          2009     Change
    --------------        ----          ----     ------
    Retail              $1,186        $1,124           6%
    Reinsurance            388           395          (2)
    Subtotal            $1,574        $1,519           4%
                        ------        ------
    Investment
     Income                 13            24        (46)%

    Total Revenue       $1,587        $1,543           3%
                        ======        ======



                                           Less:
    (millions)             Less:       Acquisitions,     Organic
    Commissions,         Currency      Divestitures,     Revenue
    Fees and Other        Impact           Other          Growth
    --------------        ------           -----          ------
    Retail                      6%                 3%         (3)%
    Reinsurance                 4                 (2)          (4)
    Subtotal                    6                  1           (3)
    Investment
     Income

    Total Revenue


Risk and Insurance Brokerage Services total revenue increased 3% to $1.6 billion compared to the prior year quarter due to a 6% favorable impact from foreign currency translation on commissions and fees and a 1% increase from acquisitions, primarily Allied North America, net of dispositions, partially offset by a 3% organic revenue decline in commissions and fees revenue and an $11 million or 46% decline in investment income.

Retail organic revenue declined 3% compared to the prior year quarter. By geographic region in Retail, the Americas organic revenue declined 5% due to an unfavorable timing impact for certain renewal business and the impact of soft pricing, lower exposure units and lower construction demand in U.S. Retail, partially offset by solid growth in Latin America. U.K. organic revenue decreased 2% due primarily to weak economic conditions, partially offset by strong growth in captives business. EMEA organic revenue decreased 2% due to weak economic conditions and lower exposure units in Continental Europe and Ireland, partially offset by modest growth in emerging markets. APAC organic revenue increased 1% reflecting strong growth in emerging markets, partially offset by soft market conditions in Australia. Reinsurance organic revenue decreased 4% due primarily to higher cedent retentions globally in treaty placements and lower facultative and capital markets transactions, partially offset by new business growth in the Americas for treaty placements.

                                          First Quarter Ended
                                          -------------------
    (millions)                          Mar 31,        Mar 31,         %
                                            2010           2009     Change
                                            ----           ----     ------
    Revenue                               $1,587         $1,543           3%
    Expenses
        Compensation and benefits            951            837          14
        Other expenses                       379            383          (1)
                                             ---            ---
    Total operating expenses               1,330          1,220           9
                                           -----          -----
    Operating income                        $257           $323        (20)%
                                            ====           ====
    Operating margin                        16.2%          20.9%


    Operating income - adjusted             $326           $316           3%
    Operating margin - adjusted             20.5%          20.5%


Compensation and benefits for the first quarter increased 14% or $114 million compared to the prior year quarter including a $53 million unfavorable impact from foreign currency translation and a $24 million increase in restructuring related costs, partially offset by benefits related to the restructuring programs. The prior year quarter included a $58 million pension curtailment gain. Other expenses for the first quarter decreased 1% or $4 million from the prior year quarter due primarily to benefits related to the restructuring programs, partially offset by a $24 million unfavorable impact from foreign currency translation. The prior year quarter included $10 million of Benfield integration costs.

First quarter operating income decreased 20% to $257 million. Adjusting for certain items detailed on page 12 of this press release, operating income increased 3% or $10 million to $326 million and operating margin was similar to the prior year quarter at 20.5% due primarily to benefits of the restructuring programs, offset by lower organic revenue, an $11 million or 46% decrease in investment income and an unfavorable margin impact from foreign currency translation.

    CONSULTING

    (millions)           First Quarter Ended
                         -------------------
    Commissions,      Mar 31,       Mar 31,          %
    Fees and Other        2010          2009      Change
    --------------        ----          ----      ------
    Services              $275          $263            5%
    Outsourcing             47            45            4
    Subtotal              $322          $308            5%
                          ----          ----
    Investment
     Income                  -             1        (100)%
    Total Revenue         $322          $309            4%
                          ====          ====



    (millions)          Less:           Less:          Organic
                                    Acquisitions,
    Commissions,      Currency      Divestitures,      Revenue
    Fees and Other     Impact           Other           Growth
    --------------     ------           -----           ------
    Services                 6%                -%          (1)%
    Outsourcing              7                  1            (4)
    Subtotal                 6%                -%          (1)%
    Investment
     Income
    Total Revenue


Consulting total revenue increased 4% to $322 million compared to the prior year quarter due primarily to a 6% favorable impact from foreign currency translation, partially offset by a 1% decline in organic commissions and fees revenue. Organic revenue in Services decreased 1% primarily reflecting the impact of weak economic conditions in our health and benefits and retirement consulting businesses, partially offset by strong growth in global compensation consulting. Organic revenue in Outsourcing declined 4% due to lower payroll counts impacting certain employee benefits and retirement outsourcing contracts.

                                          First Quarter Ended
                                          -------------------
    (millions)                          Mar 31,        Mar 31,         %
                                            2010           2009     Change
                                            ----           ----     ------
    Revenue                                 $322           $309           4%
    Expenses
        Compensation and benefits            196            162          21
        Other expenses                        77             77           -
                                             ---            ---
    Total operating expenses                 273            239          14
                                             ---            ---
                                             $49            $70        (30)%
    Operating income                         ===            ===
    Operating margin                        15.2%          22.7%

    Operating income - adjusted              $56            $52           8%
    Operating margin - adjusted             17.4%          16.8%


Compensation and benefits for the first quarter increased 21% or $34 million from the prior year quarter including a $10 million unfavorable impact from foreign currency translation and a $3 million increase in restructuring related costs, partially offset by benefits related to the 2007 restructuring program. The prior year quarter included a $21 million pension curtailment gain. Other expenses were similar to the prior year quarter due primarily to benefits related to the 2007 restructuring program, partially offset by a $5 million unfavorable impact from foreign currency translation.

First quarter operating income decreased 30% to $49 million. Adjusting for certain items detailed on page 12 of this press release, operating income increased 8% or $4 million to $56 million and operating margin increased 60 basis points to 17.4% versus the prior year quarter due primarily to benefits related to the 2007 restructuring program, partially offset by lower organic revenue.

    INCOME FROM CONTINUING OPERATIONS
    ---------------------------------
                                                  First Quarter
                                                      Ended
                                                 --------------
    (millions)                               Mar 31,      Mar 31,     %
                                                2010         2009  Change
                                                ----         ----  ------
    Risk and Insurance Brokerage Services       $257         $323     (20)%
    Consulting                                    49           70      (30)
    Unallocated expenses                         (33)         (27)      22
    Operating income from continuing
     operations before tax                      $273         $366     (25)%
                                                ----         ----
    Interest income                                1            7      (86)
    Interest expense                             (34)         (29)      17
    Other income (expense)                         7           (1)     N/A
    Income from continuing operations before
     tax                                        $247         $343     (28)%
                                                ====         ====


Unallocated expenses increased $6 million to $33 million due primarily to higher performance-based incentive compensation. Interest income decreased $6 million compared to the prior year quarter due primarily to lower cash balances and lower income related to certain private equity securities. Interest expense increased $5 million to $34 million due to an increase in the average rate on outstanding debt. Other income was $7 million including $4 million related to gains on sales of certain businesses.

Conference Call and Webcast Details

The Company will host a conference call on Friday, April 30, 2010 at 7:30 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: AON) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its more than 36,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon's industry-leading global resources and technical expertise are delivered locally through more than 500 offices in more than 120 countries. Named the world's best broker by Euromoney magazine's 2008 and 2009 Insurance Survey, Aon also ranked highest on Business Insurance's listing of the world's largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007, 2008, and 2009, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007, 2008 and 2009 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com.

Safe Harbor Statement

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, the outcome of inquiries from regulators and investigations related to compliance with the U.S. Foreign Corrupt Practices Act and non-U.S. anti-corruption laws, the impact of investigations brought by U.S. state attorneys general, U.S. state insurance regulators, U.S. federal prosecutors, U.S. federal regulators, and regulatory authorities in the U.K. and other countries, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, and to realize the anticipated benefits of the Benfield merger. 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.

Explanation of Non-GAAP Measures

This press release includes supplemental information related to organic revenue growth and several additional measures including expenses, margins and income per share, that exclude the effects of restructuring charges and certain other noteworthy items that affected results for the comparable periods. Organic revenue growth excludes from reported revenues the impact of foreign exchange, acquisitions, divestitures, transfers between business units, reimbursable expenses and unusual items. The impact of foreign exchange is determined by translating last year's revenue, expense or net income at this year's foreign exchange rates. Reconciliations are provided in the attached schedules. Supplemental organic revenue growth information and additional measures that exclude the effects of the restructuring charges and certain other items do not affect net income or any other GAAP reported amounts. Management believes that these measures are important to make meaningful period-to-period comparisons and that this supplemental information is helpful to investors. They should be viewed in addition to, not in lieu of, the Company's Consolidated Statements of Income. Industry peers provide similar supplemental information regarding their performance, although they may not make identical adjustments.

    Investor Contact:                         Media Contact:
    Scott Malchow                             David Prosperi
                                               Vice President, Global Public
    Vice President, Investor Relations         Relations
    312-381-3983                              312-381-2485



    Aon Corporation
    Consolidated Statements of Income (Unaudited)

                                                 First Quarter Ended
                                                 -------------------
                                         Mar. 31,    Mar. 31,      Percent
    (millions except per share data)        2010        2009       Change
                                        ---------   ---------     --------
    Revenue
    -------
      Commissions, fees and other           $1,891      $1,821      4%
      Fiduciary investment income               13          25    (48)
                                               ---         ---
        Total revenue                        1,904       1,846      3
                                             -----       -----

    Expenses
    --------
      Compensation and benefits              1,163       1,014     15
      Other general expenses                   468         466      -
                                               ---         ---
        Total operating expenses             1,631       1,480     10
                                             -----       -----
    Operating income                           273         366    (25)

      Interest income                            1           7    (86)
      Interest expense                         (34)        (29)    17
      Other income (expense)                     7          (1)   N/A
                                               ---         ---
    Income from continuing operations
     before income taxes                       247         343    (28)
      Income taxes (1)                          61         108    (44)
                                               ---         ---
    Income from continuing operations          186         235    (21)
                                               ---         ---

    Income from discontinued
     operations before income taxes              2          91    (98)
      Income taxes (2)                           2          41    (95)
                                               ---         ---
    Income from discontinued
     operations                                  -          50  (100)
                                               ---         ---

     Net income                                186         285    (35)
      Less:  Net income attributable to
       the noncontrolling interests              8           5     60
                                               ---         ---
    Net income attributable to Aon
     stockholders                             $178        $280   (36)%
                                              ====        ====

    Net income attributable to Aon
     stockholders:
      Income from continuing operations       $178        $230   (23)%
      Income from discontinued
       operations                                -          50  (100)
                                               ---         ---
      Net income                              $178        $280   (36)%
                                              ====        ====
    Basic net income per share
     attributable to Aon stockholders:
      Income from continuing operations      $0.65       $0.81   (20)%
      Income from discontinued
       operations                                -        0.18  (100)
      Net income                             $0.65       $0.99   (34)%
                                             =====       =====

    Diluted net income per share
     attributable to Aon stockholders:
      Income from continuing operations      $0.63       $0.79   (20)%
      Income from discontinued
       operations                                -        0.17  (100)
                                               ---        ----
      Net income                             $0.63       $0.96   (34)%
                                             =====       =====

    Weighted average common shares
     outstanding -diluted                    283.4       292.0    (3)%
                                             =====       =====

     (1) Tax rate for continuing operations is 24.9% and 31.5% for the
        first quarter ended March 31, 2010 and 2009, respectively.
        The underlying tax rate on continuing operations for 2010 is
        approximately 28%.

    (2) Tax rate for discontinued operations is 74.4% and 45.1% for the
        first quarter ended March 31, 2010 and 2009, respectively.




    Aon Corporation
    Revenue from Continuing Operations (Unaudited)

                                         First Quarter Ended
                                         -------------------
                                                                  Organic
                                             Mar.                 Revenue
                                 Mar. 31,     31,      Percent        Growth
    (millions)                      2010     2009      Change            (1)
                                 ---------  -----     -------- --------
    Commissions, Fees and
     Other
    ---------------------
    Risk and Insurance
     Brokerage Services             $1,574  $1,519      4%      (3)%
    Consulting                         322     308      5        (1)
                                       ---     ---
        Total Operating Segments    $1,896  $1,827      4%      (3)%
                                    ======  ======

    Fiduciary Investment
     Income
    --------------------
    Risk and Insurance
     Brokerage Services                $13     $24   (46)%
    Consulting                           -       1  (100)
                                       ---     ---
        Total Operating Segments       $13     $25   (48)%
                                       ===     ===

    Total Revenue
    -------------
    Risk and Insurance
     Brokerage Services             $1,587  $1,543      3%
    Consulting                         322     309      4
    Intersegment                        (5)     (6)   (17)
                                       ---     ---
        Total                       $1,904  $1,846      3%
                                    ======  ======




    (1)   Organic revenue growth excludes the impact of foreign exchange,
          acquisitions, divestitures, transfers, reimbursable expenses and
          unusual items.  Organic revenue growth, a non-GAAP measure, is
          reconciled to the corresponding U.S. GAAP percent change in revenue
          on page 11 of this release.

    Aon Corporation
    Segments (Unaudited)


    Risk and Insurance Brokerage
     Services                                    First Quarter Ended
                                                 -------------------
                                         Mar.
                                          31,       Mar. 31,          Percent
    (millions)                           2010          2009            Change
                                        -----       ---------        --------
    Revenue
    -------
      Commissions, fees and other       $1,574         $1,519          4 %
      Fiduciary investment income           13             24         (46)
                                           ---            ---
        Total revenue                    1,587          1,543           3
                                         -----          -----

    Expenses
    --------
      Compensation and benefits            951            837          14
      Other general expenses               379            383          (1)
                                           ---            ---
        Total operating expenses         1,330          1,220           9
                                         -----          -----

    Operating income                      $257           $323        (20)%
                                          ====           ====

    Operating margin                      16.2%          20.9%

    Consulting                                 First Quarter Ended
                                               -------------------
                                         Mar.
                                          31,       Mar. 31,        Percent
    (millions)                           2010          2009          Change
                                        -----       ---------      --------
    Revenue
    -------
      Commissions, fees and other         $322           $308          5 %
      Fiduciary investment income            -              1        (100)
                                           ---            ---
        Total revenue                      322            309           4
                                           ---            ---

    Expenses
    --------
      Compensation and benefits            196            162          21
      Other general expenses                77             77           -
                                           ---            ---
        Total operating expenses           273            239          14
                                           ---            ---

    Operating income                       $49            $70        (30)%
                                           ===            ===

    Operating margin                      15.2%          22.7%

    Total Operating Income                     First Quarter Ended
                                               -------------------
                                         Mar.
                                          31,       Mar. 31,        Percent
    (millions)                           2010          2009          Change
                                        -----       ---------      --------
    Risk and Insurance Brokerage
     Services                             $257           $323        (20)%
    Consulting                              49             70         (30)
    Unallocated expenses                   (33)           (27)         22
                                           ---            ---
       Total operating income             $273           $366        (25)%
                                          ====           ====

    Total operating margin                14.3%          19.8%



    Aon Corporation
    Reconciliation of Non-GAAP Measures - Organic Revenue Growth (Unaudited)

                                                   First Quarter Ended
                                                    -------------------
                                               Mar. 31,  Mar. 31,  Percent
    (millions)                                   2010      2009     Change
                                              --------- --------- --------
    Commissions, Fees and Other
    ---------------------------
    Risk and Insurance Brokerage Services
     Segment:
      Retail brokerage
        Americas                                   $487      $477   2%
        United Kingdom                              121       116   4
        Europe, Middle East & Africa                477       447   7
        Asia Pacific                                101        84  20
                                                    ---       ---
           Total Retail brokerage                 1,186     1,124   6
      Reinsurance brokerage                         388       395  (2)
                                                    ---       ---
           Total Risk and Insurance Brokerage
            Services                              1,574     1,519   4
                                                  -----     -----
    Consulting Segment:
        Consulting services                         275       263   5
        Outsourcing                                  47        45   4
                                                    ---       ---
           Total Consulting                         322       308   5
                                                    ---       ---
    Total Operating Segments                     $1,896    $1,827   4%
                                                 ======    ======



                                               First Quarter Ended
                                               -------------------
                                        Less:       Less:         Organic
                                      Currency  Acquisitions,      Revenue
                                       Impact   Divestitures       Growth
    (millions)                            (1)    & Other           (2)
                                     --------- --------------     --------
    Commissions, Fees and Other
    ---------------------------
    Risk and Insurance Brokerage
     Services Segment:
      Retail brokerage
        Americas                         3 %        4 %          (5)%
        United Kingdom                    6          -            (2)
        Europe, Middle East & Africa      7          2            (2)
        Asia Pacific                     20         (1)            1
           Total Retail brokerage         6          3            (3)
      Reinsurance brokerage               4         (2)           (4)
           Total Risk and Insurance
            Brokerage Services            6          1            (3)
    Consulting Segment:
        Consulting services               6          -            (1)
        Outsourcing                       7          1            (4)
           Total Consulting               6          -            (1)
    Total Operating Segments             6 %        1 %          (3)%

    (1) Currency impact is determined by translating last year's revenue at
        this year's foreign exchange rates.

    (2) Organic revenue growth excludes the impact of foreign exchange,
        acquisitions, divestitures, transfers, reimbursable expenses and
        unusual items.




    Aon Corporation
    Reconciliation of Non-GAAP Measures - Operating Income and Diluted
    Earnings Per Share (Unaudited) (1)


                                   First Quarter Ended March 31, 2010
                                   ----------------------------------
                       Risk and
                       Insurance                        Unallocated
                       Brokerage                          Income &
    (millions)         Services       Consulting           Expense    Total
                      ---------       ----------        ------------  -----
    Revenue               $1,587             $322                $(5) $1,904
                          ======             ====                ===  ======

    Operating
     income (loss)
     -as reported           $257              $49               $(33)   $273
      Restructuring
       charges                69                7                  -      76
                             ---              ---                ---     ---
    Operating
     income (loss)
     -as adjusted           $326              $56               $(33)   $349
                            ====              ===               ====    ====

    Operating
     margins -as
     adjusted               20.5%            17.4%               N/A    18.3%
                            ====             ====                ===    ====

                                First Quarter Ended March 31, 2009
                                ----------------------------------
                       Risk and
                       Insurance                        Unallocated
                       Brokerage                          Income &
    (millions)         Services       Consulting           Expense    Total
                      ---------       ----------        ------------  -----
    Revenue               $1,543             $309                $(6) $1,846
                          ======             ====                ===  ======

    Operating
     income (loss)
     -as reported           $323              $70               $(27)   $366
      Restructuring
       charges                40                3                  -      43
      Pension
       curtailment           (58)             (21)                (4)    (83)
      Benfield
       integration
       costs                  10                -                  -      10
      Anti-bribery
       and
       compliance
       initiatives             1                -                  -       1
                             ---              ---                ---     ---
    Operating
     income (loss)
     -as adjusted           $316              $52               $(31)   $337
                            ====              ===               ====    ====

    Operating
     margins -as
     adjusted               20.5%            16.8%               N/A    18.3%
                            ====             ====                ===    ====

                         First Quarter Ended
                              March 31,
                              ---------
    (millions
     except per
     share data)            2010             2009
                            ----             ----
    Operating
     income -as
     adjusted               $349             $337
      Interest
       income                  1                7
      Interest
       expense               (34)             (29)
      Other income
       (expense)               7               (1)
                             ---              ---
    Income from
     continuing
     operations
     before income
     taxes -
      as adjusted            323              314
      Income taxes
       (2)                    80               90
                             ---              ---
    Income from
     continuing
     operations -
     as adjusted             243              224
      Less:  Net
       income
       attributable
       to
       noncontrolling
       interests               8             5
                             ---              ---
    Income from
     continuing
     operations
     attributable
     to
      Aon
       stockholders
       -as adjusted         $235             $219
                            ====             ====

    Diluted
     earnings per
     share from
     continuing
     operations -
      as adjusted          $0.83            $0.75
                           =====            =====

    Weighted
     average
     common shares
     outstanding -
     diluted               283.4         292.0
                           =====            =====



    (1)   Certain noteworthy items impacting operating income in 2010 and 2009
          are described in this schedule.  The items shown with the caption
          "as adjusted" are non-GAAP measures.

    (2)   Tax rate for continuing operations is 24.9% and 31.5% for the first
          quarter ended March 31, 2010 and 2009, respectively (U.S. GAAP).
          All reconciling items are taxed at the effective tax rate.  However,
          the 2009 U.S. GAAP effective tax rate was adjusted to 28.7% to
          exclude the impact of the 40% tax rate applied to the $83 million
          U.S. pension curtailment gain.


    Aon Corporation
    Restructuring Plans (Unaudited) (1)

    2007 Restructuring Plan

    By Type:                                               Actual
                                                           ------
    (millions)                                Full Year 2007  Full Year 2008
                                              --------------  --------------
    Workforce reduction                                  $17             $166
    Lease consolidation                                   22               38
    Asset impairments                                      4               18
    Other costs associated with restructuring              3               29
                                                         ---              ---
    Total restructuring and related expenses             $46             $251
                                                         ===             ====

    By Segment:

    Risk and Insurance Brokerage Services                $41             $234
    Consulting                                             5               17
                                                         ---              ---
    Total restructuring and related expenses             $46             $251
                                                         ===             ====



    By Type:                                                Actual
                                                            ------
                                                   Full     First
                                                   Year    Quarter    Total to
    (millions)                                     2009      2010        Date
                                                  ------   -------   ---------
    Workforce reduction                            $251        $57        $491
    Lease consolidation                              78          6         144
    Asset impairments                                15          1          38
    Other costs associated with
     restructuring                                   13          3          48
                                                    ---        ---         ---
    Total restructuring and related
     expenses                                      $357        $67        $721
                                                   ====        ===        ====

    By Segment:

    Risk and Insurance Brokerage
     Services                                      $322        $60        $657
    Consulting                                       35          7          64
                                                    ---        ---         ---
    Total restructuring and related
     expenses                                      $357        $67        $721
                                                   ====        ===        ====



                                                        Estimated
    (millions)                                           Total
                                                       ---------
    Workforce reduction                                 $510
    Lease consolidation                                  149
    Asset impairments                                     39
    Other costs associated with
     restructuring                                        52
                                                         ---
    Total restructuring and related expenses            $750
                                                        ====

    By Segment:

    Risk and Insurance Brokerage Services               $683
    Consulting                                            67
                                                         ---
    Total restructuring and related expenses            $750
                                                        ====



    Benfield Restructuring Plan

    By Type:                                            Operations
                                                        ----------
                                   Purchase
                                     Price                 First
                                  Allocation  Full Year   Quarter    Total to
    (millions)                         (2)       2009      2010        Date
                                 ----------- ----------  --------   ---------
    Workforce reduction                 $32         $38        $5         $75
    Lease consolidation                  22          14         3          39
    Asset impairments                     -           2         -           2
    Other costs associated with
     restructuring                        1           1         1           3
                                        ---         ---       ---         ---
    Total restructuring and
     related expenses                   $55         $55        $9        $119
                                        ===         ===       ===        ====



                                                         Estimated
    (millions)                                             Total
                                                         ---------
    Workforce reduction                                        $93
    Lease consolidation                                         55
    Asset impairments                                            4
    Other costs associated with restructuring                    3
                                                               ---
    Total restructuring and related expenses                  $155
                                                              ====

     (1)  In the Consolidated Statements of Income, workforce
     reductions are included in "Compensation and benefits";
     lease consolidations, asset impairments, and other costs
     associated
          with restructuring are included in "Other general
           expenses".

    (2)  Represents costs associated with the execution of
     restructuring activity identified at the acquisition
     date (November 30, 2008).




    Aon Corporation
     Condensed Consolidated Statements of Financial Position


                                                           As of
                                                          -----
                                              March 31,       December 31,
     (millions)                                  2010              2009
                                             ----------      -------------
                                            (Unaudited)
     ASSETS
     ------
       Current Assets
       Cash and cash equivalents                    $422               $217
       Short-term investments                        312                422
       Receivables, net                            1,983              2,052
       Fiduciary assets (1)                       11,089             10,835
       Other current assets                          462                463
                                                     ---                ---
         Total Current Assets                     14,268             13,989
       Goodwill                                    5,887              6,078
       Intangible assets, net                        770                791
       Fixed assets, net                             452                461
       Investments                                   308                319
       Other non-current assets                    1,274              1,320
                                                   -----              -----
       Total Assets                              $22,959            $22,958
                                                 =======            =======

     LIABILITIES AND EQUITY
     ----------------------
       Current Liabilities
       Fiduciary liabilities                     $11,089            $10,835
       Short-term debt and current portion
        of long-term debt                             84                 10
       Accounts payable and accrued
        liabilities                                1,269              1,535
       Other current liabilities                     334                260
                                                     ---                ---
         Total Current Liabilities                12,776             12,640
       Long-term debt                              2,013              1,998
       Pension and other post employment
        liabilities                                1,770              1,889
       Other non-current liabilities                 943              1,000
                                                     ---              -----
       Total Liabilities                          17,502             17,527
                                                  ------             ------
       Total Aon Stockholders' Equity              5,402              5,379
       Noncontrolling interests                       55                 52
                                                     ---                ---
       Total Equity                                5,457              5,431
       Total Liabilities and Equity              $22,959            $22,958
                                                 =======            =======



    (1) Includes short-term investments:  2010 - $3,600, 2009 -
    $3,329.

    Aon Corporation
     Condensed Consolidated Statements of Cash Flows (Unaudited)

                                                     First Quarter Ended
                                                     -------------------
                                                    March 31,    March 31,
     (millions)                                        2010         2009
                                                   ----------   ----------
     CASH FLOWS FROM OPERATING ACTIVITIES
       Net income                                         $186         $285
       Adjustments to reconcile net income to
        cash provided by operating activities:
         Gains from sales of businesses, net                (6)         (92)
         Depreciation and amortization                      58           60
         Stock compensation expense                         66           40
         Deferred income taxes                             (12)          14
       Change in assets and liabilities:
         Change in funds held on behalf of clients         396          512
         Receivables, net                                   45          179
         Accounts payable and accrued liabilities         (274)        (260)
         Restructuring reserves                             (1)          (8)
         Current income taxes                               65           82
         Pension and other post employment
          liabilities                                      (55)        (142)
         Other assets and liabilities                       (4)        (117)
                                                           ---         ----
           Cash Provided by Operating Activities           464          553
                                                           ---          ---

     CASH FLOWS FROM INVESTING ACTIVITIES
       Sales of long-term investments                       66            7
       Purchase of long-term investments                   (10)         (12)
       Net sales (purchases) of short-term
        investments - non-fiduciary                         97         (193)
       Net purchases of short-term investments -
         funds held on behalf of clients                  (396)        (512)
       Acquisition of businesses, net of cash
        acquired                                           (47)         (33)
       Proceeds from sale of businesses                      -          128
       Capital expenditures                                (33)         (21)
                                                           ---          ---
           Cash Used for Investing Activities             (323)        (636)
                                                          ----         ----

     CASH FLOWS FROM FINANCING ACTIVITIES
       Issuance of common stock                              -           27
       Purchase of treasury stock                          (50)           -
       Issuance of stock for employee benefit
        plans                                               35           28
       Issuance (repayment) of debt                         73           (1)
       Cash dividends to stockholders                      (41)         (41)
                                                           ---          ---
           Cash Provided by Financing Activities            17           13
                                                           ---          ---

     Effect of Exchange Rate Changes on Cash                47          (11)
                                                           ---          ---
     Net Increase (Decrease) in Cash and Cash
      Equivalents                                          205          (81)
     Cash and Cash Equivalents at Beginning of
      Period                                               217          582
                                                           ---          ---
     Cash and Cash Equivalents at End of Period           $422         $501
                                                          ====         ====



SOURCE Aon Corporation

Stock Quote: NYSE

Price 282.78

Change -1.54

Volume 813,696

% Change -0.54%

Intraday High 284.49

52 Week High 341.98

Intraday Low 280.05

52 Week Low 246.21

Today's Open 281.78

Previous Close 284.32

Oct 05, 2022 04:03 PM Pricing delayed 20 minutes
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