Aon Reports Fourth Quarter and Full Year 2008 Results
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Aon Reports Fourth Quarter and Full Year 2008 Results - Increase in total annual savings related to restructuring program in 2007 to $ 70 million to $ 370 million, and costs required to achieve economies of ... - Total revenue was $ 1.9 billion with organic growth in commissions and fees of 2% - EPS from continuing operations was $ 0.43 Fourth Quarter Highlights - EPS from operations excluding certain items has increased from 19% to $ 0.81 - Brokerage revenue declined 3% due to an 8% decrease of foreign exchange, organic growth in commissions and fees of 2% - Brokerage margin before tax is 13.7% and adjusted pre-tax margin, excluding certain items, increased 150 basis points to 19.9% - Board of revenue 8% due to a 9% decrease of foreign currency, organic growth in commissions and fees of 3% - Consulting pre-tax margin was 16.1% and adjusted pre-tax margin, excluding certain items, increased 180 basis points to 19.0% - Completed merger with Benfield Group, creating an unparalleled reinsurance franchise CHICAGO, February 6
- Increase in total annual savings related to restructuring program in 2007 to $ 70 million to $ 370 million, and costs required to achieve savings of $ 100 million to $ 550 million
- Increase in total annual savings related to restructuring program in 2007 to $ 70 million to $ 370 million, and costs required to achieve savings of $ 100 million to $ 550 million
CHICAGO, February 6 / PRNewswire-FirstCall / - Aon Corporation (NYSE: AOC) announced today its results for the fourth quarter and year ended December 31, 2008.
Net income decreased 95% to 10 million or $ 0.03 per share, compared with $ 207 million or $ 0.64 per share for the quarter last year, mainly due to s' expects $ 116 million after tax loss on the sale of the remaining insurance companies that are now included in discontinued operations, an increase in restructuring costs and costs related to the merger Benfield. Net income from continuing operations decreased by 35% to $ 123 million, or $ 0.43 per share, compared with $ 188 million or $ 0.58 per share for the prior year quarter. Net income from continuing operations per share, excluding certain items, increased 19% to $ 0.81 compared to $ 0.68 for the prior year quarter. Certain items that impacted fourth quarter results and comparisons with the prior year quarter are detailed in the reconciliation of non-GAAP measures on page 12 of this release.
"In the fourth quarter, we achieved solid results despite a very difficult market and economic environment. These results reflect the strength of our industry-leading, global network of resources and capacity, and continued progress in each of our key operating parameters. Organic growth was two percent, the adjusted pre-tax margin increased 120 basis points and adjusted earnings per share from continuing operations increased by 19%, "said Greg Case, President and CEO, Aon Corporation. "We begin 2009 in a strong position with a portfolio of commodities that is now aligned around risk and human capital solutions advice. Our expense initiatives and program delivery restructuring are significant margin improvement, while at the same funding investments in value-added services and capabilities to support our customers. Our balance sheet remained strong, which gave us the financial flexibility to effectively allocate capital, as emphasized by the recent merger with Benfield. All these actions support our belief in the underlying strength of Aon and our ongoing commitment to provide long term value for shareholders. "
SUMMARY OF FOURTH QUARTER
Total revenue declined 4% to $ 1.9 billion due to a decrease of 8% of foreign currency, an increase of 2% from acquisitions net of divestitures and organic growth in sales commissions and fees of 2%. Total expenditure increased by 1% or $ 16 million to $ 1.8 billion, including $ 155 million of the favorable impact of foreign currency translation, partially offset by an increase of $ 53 million in restructuring costs, $ 46 million of transaction costs Benfield, and $ 42 million of other expenses Benfield.
The fourth quarter includes the operating results of Benfield since the closing of the merger on November 28, and reflects $ 38 million revenue and $ 42 million of expenditure. The results of Benfield net income decreased by $ 0.01 per share in the fourth quarter.
Restructuring costs were $ 87 million in the fourth quarter compared to $ 34 million in the prior year quarter. An analysis of expenses related to restructuring by sector and type for both 2007 and Benfield restructuring programs are detailed on page 13 of this release.
The restructuring of the economies in the fourth quarter of 2007 related to the restructuring are estimated at $ 32 million compared to no material savings from the previous year quarter. Of the estimated restructuring savings in the fourth quarter of $ 27 million were related to the brokerage segment of the first reduction. In 2007, the restructuring program made approximately $ 78 million in accumulated savings in 2008. Before any reinvestment of savings, the restructuring program in 2007 is now expected to provide the cumulative rate of implementation of cost savings of approximately $ 240-265 million in 2009 and $ 370 million in 2010, mainly because of additional cost savings opportunities to streamline support functions globally.
While Benfield recently announced restructuring program is expected to achieve significant savings over the next three years, the Company realized savings from the no program for the fourth quarter. The Company expects the restructuring plan of result before tax costs of approximately $ 185 million over three years, part of which will be included in the purchase price allocation. Before any reinvestment of savings, Benfield restructuring program should report the cumulative cost savings of $ 33-41 million in 2009, $ 84-94 million in 2010 and $ 122 million in 2011.
Foreign currency translation decreased net earnings of $ 0.01 per share, compared to the prior year quarter primarily due to fluctuations of the U.S. dollar against most major currencies.
Effective tax rate on continuing operations decreased by 28.9% for the fourth quarter compared to 30.6% for the quarter last year primarily due to reductions in certain statutory tax rate and changes in the geographical distribution of income.
Average diluted shares outstanding were 288 million in the fourth quarter, compared to 324 million in the quarter last year, mainly attributable to the Company's share repurchase program.
Discontinued operations, after-tax loss was $ 113 million, or $ 0.40 per share, compared with after-tax income of $ 19 million or $ 0.06 per share for the prior year quarter. With the fourth quarter, the Company entered into an agreement to dispose of its property and operations of accident, and the results were classified as held for marketing and operations for the quarter. The loss after tax for the quarter is primarily attributable to a concentration of $ 116 million loss on the sale of these operations. The discontinued operations include the results of specialists in motor insurance (SIA) and the prior year quarter, the results of the AIS, Combined Insurance Company of America and Sterling Life Insurance.
SEGMENT REVIEW OF FOURTH QUARTER
Some items to note the revenue, income before tax and before tax margins in the fourth quarter of 2008 and 2007. The fourth quarter segment reviews below includes information on adjusting the income before tax and before tax margin, which is described in detail on the reconciliation of the impact of non-GAAP measures on the segments and diluted earnings per share "on page 12 of this release.
RISK AND INSURANCE BROKERAGE SERVICES
-------------------------------------
(in millions) Fourth quarter ended
Less:
------------------------- Less: Acquisitions, Organic
Commissions, Dec 31, Dec 31,% Currency Divestitures, Revenue
Taxes, Other 2008 2007 Change Impact other growth
------------ ------- ------- ------ -------- ---------- --- -------
Americas $ 642 $ 650 (1) (4)%% -% 3%
United Kingdom 196 223 (12) (14) 1 1
EMEA 333 353 (6) (9) 2 1
Asia-Pacific 119 140 (15) (16) (2) 3
Reinsurance 247 210 18 (5) 21 2
------- ------- ------- ------- -------- -------------
Sub-Total $ 1537 $ 1576 (2)% (8)% 4% 2%
------- ------- ------- ------- -------- -------------
Investment Income $ 44 $ 51 (14%)
------- ------- -------
Total income $ 1,581 $ 1,627 (3)%
======= ======= =======
Risk and Insurance Brokerage Services total revenue decreased by 3% to $ 1.6 billion compared to the previous year due to a quarter of 8% of the negative impact of foreign currencies and a decrease of 14% of investment income, partially offset by an increase of 4% from acquisitions net of provisions and 2% organic growth in income from commissions and fees. Americas domestic sales increased by 3%, reflecting strong growth in U.S. retail and strong growth in Latin America. United Kingdom, revenue increased 1% due mainly to the growth of the captive. EMEA internal sales increased 1% due to growth in continental Europe and emerging markets. Organic sales in Asia Pacific grew by 3%, reflecting strong growth in most Asian markets, partially offset by the impact of certain regulatory changes in Japan. Internal reinsurance turnover increased by 2% mainly due to global growth and optional treaty placements, partially offset by soft market conditions.
Fourth quarter ended
------------------------
(in millions) Dec 31, Dec 31,%
2008 2007 Change
-------- -------- -------
Income $ 1581 $ 1627 (3)%
Expenditure
Compensation and benefits 934 923 1
Other expenses 426 434 (2)
-------- -------- -------
Total operating expenses 1360 1357 --
Operating income 221 270 (18%)
Other (income) expense 4 (6) N / A
-------- -------- -------
Income before taxes $ 217 $ 276 (21%)
======= ======== ========
Pre-tax margin 13.7% 17.0%
Income before tax - adjusted $ 314 $ 300 5%
Pre-tax margin - adjusted 19.9% 18.4%
Total operating expenses for the fourth quarter increased $ 3 million for the prior year quarter. The increase of $ 3 million increase includes a $ 48 million of restructuring costs, $ 40 million of Benfield operating expenses and $ 11 million to the comments above under the Foreign Corrupt Practices Act (FCPA) and similar laws in other countries and compliance initiatives, primarily offset by $ 124 million of the favorable impact of foreign currency translation of $ 27 million benefit related to restructuring program in 2007, and $ 33 million profit due mainly to an increase in dollars in commissions and fees receivable in the UK This service is currently better reflects a continuing relationship between the U.S. dollar and pound sterling costs for the businesses in the UK market .
Fourth quarter income before tax decreased by 21% to 217 million. Adjusting for certain items on page 12 of this release, the income before tax increased by 5% or $ 14 million to $ 314 million and the margin before tax increased by 150 basis points to 19.9 % over the quarter last year due mainly to the benefits of the 2007 restructuring program and other operational improvements, partially offset by $ 21 million related to the adverse impact line adjustments in some European countries and $ 7 million of lower investment income.
Brokerage results for the fourth quarter include $ 38 million revenue and $ 2 million pre-tax loss of Benfield. Benfield results of operations have had a negative impact of 60 basis points over the adjusted pre-tax margin brokerage.
CONSULTING
----------
(in millions) Fourth Quarter
Less Ended:
----------------- Less: Acquisitions, Organic
Commissions, Dec 31, Dec 31,% Currency Divestitures, Revenue
Taxes, Other 2008 2007 Change Impact other growth
----------- ------- ------- ------ -------- ----------- --- -------
Services $ 289 $ 313 (8)% (9)% (3)% 4%
Outsourcing 52 59 (12) (10) 2 (4)
------ ------- ------- -------- ------- --------------
Subtotal $ 341 $ 372 (8)% (9)% (2)% 3%
------ ------- ------- -------- ------- --------------
Investment income $ 1 $ 1 -%
------- ------- ------
Total Revenues $ 342 $ 373 (8)%
====== ======= =======
Consulting Total revenue decreased 8% to $ 342 million from the previous year due to a quarter, 9% of the adverse impact of currency, a reduction of 2% from acquisitions net of divestitures, partially offset by 3% organic growth in income from commissions and fees. Internal revenue services has increased by 4%, reflecting the growth of retirement and health benefits counseling. Internal turnover in Outsourcing declined 4% due to the previously announced termination of a major outsourcing contract, partially offset by modest growth in benefits outsourcing.
Fourth quarter ended
------------------------
(in millions) Dec 31, Dec 31,%
2008 2007 Change
------ -------- --------
Income $ 342 $ 373 (8)%
Expenditure
Compensation and benefits 203 219 (7)
Other expenses 84 94 (11)
------ -------- --------
Total operating expenses 287 313 (8)
Operating income 55 60 (8)%
Other (income) expense - - --
------ -------- --------
Income before taxes $ 55 $ 60 (8)%
======== ======== ======
Pre-tax margin of 16.1% to 16.1%
Income before tax - adjusted $ 65 $ 64 2%
Pre-tax margin - adjusted 19.0% 17.2%
Compensation and benefits for the fourth quarter decreased 7% or $ 16 million last year quarter, including $ 18 million favorable impact of currency conversion and benefits related to restructuring program in 2007, partially offset by a increase of $ 4 million in restructuring costs. Other expenses decreased 11% or $ 10 million compared to the prior year quarter, including $ 7 million of the favorable impact of currency conversion and benefits related to restructuring program in 2007.
Income before tax for the fourth quarter decreased by 8% to $ 55 million $ due to a decrease of 8 million of foreign exchange. Pre-tax margin was 16.1%, similar to the prior year quarter. Adjusting for certain items on page 12, income before tax increased by 2% to 65 million before tax margin of 180 basis points increased by 19.0%.
FREE INCOME AND EXPENSES
------------------------------
Fourth quarter ended
-----------------------
(in millions) Dec 31, Dec 31,%
2008 2007 Change
------- ------- ------
Segment revenue
before taxes $ 272 $ 336 (19%)
Unallocated investment income 6 11 (45)
Unallocated expenses (75) (40) 88
Interest expense (30) (36) (17)
------- ------- ------
Income from continuing
operations before taxes $ 173 $ 271 (36%)
====== ======= =======
Unallocated investment income for the fourth quarter decreased $ 5 million to $ 6 million compared to the prior year quarter primarily due to the timing of distributions of certain private equity funds. Unallocated increased $ 35 million to 75 million per quarter last year primarily due to $ 44 million to cover costs relating to the transaction Benfield. Interest expense decreased $ 6 million to 30 million in the prior year quarter due to fluctuations in foreign currencies and lower average interest rate on outstanding debt.
SUMMARY OF THE YEAR 2008
Total revenue for 2008 rose 4% to $ 7.6 billion with organic revenue growth of 2%. Risk and Insurance Brokerage Services total revenue increased 5% to 6.2 billion with organic growth of turnover in commissions and fees of 2%. Consulting revenue total was similar to the previous year, with organic growth of revenues from commissions and fees of 3%.
Net income for 2008 increased 71% to $ 1.5 billion, compared to $ 864 million for the previous year. Net income from continuing operations decreased by 6% to $ 621 million, compared with $ 662 million for the previous year.
EPS for 2008 increased 83% to $ 4.91 per share compared to $ 2.69 per share for the previous year. EPS from continuing operations was $ 2.06 against $ 2.07 for the previous year. EPS from continuing operations, excluding certain items, increased 24% to $ 2.90 compared to $ 2.33 for the previous year. Some items that affected the entire year and comparing the results against the previous year are detailed in the reconciliation of the impact of non-GAAP measures on page 12.
During 2008, the Company has repurchased approximately 42.6 million shares for $ 1.9 billion at an average price of $ 45.08 per share. As of December 31, 2008, the Company had approximately $ 850 million remaining authorization to repurchase shares.
Conference Call and Webcast Details
The Company will host a conference call on Friday, February 6, 2009 at 7:30 am central time. Interested parties may listen to the conference call through a live audio webcast at http://www.aon.com.
About Aon
Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance brokerage and reinsurance, consulting and human capital. With over 37,000 employees worldwide, Aon readily provides the distinctive client value via innovative and effective risk management and productivity solutions. Our industry leading global resources and technical expertise are delivered locally through more than 500 offices in over 120 countries. Named the world's best broker by Euromoney magazine's 2008 Insurance Survey, Aon also ranked the highest on the Business Insurance list of the largest insurance brokers based on commercial retail, wholesale, of reinsurance and insurance brokerage revenues in 2008. H Best Aon deemed the number one insurance broker based on brokerage revenues in 2007 and 2008, Aon was voted best insurance intermediary, best reinsurance, and the best consulting firm in employee benefits in 2007 and 2008 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 relating 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 various factors. Potential factors that could impact results include: general economic conditions in different countries where we do business around the world, changes in equity and fixed income markets that could affect 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 schemes retirement, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives to generate cost savings, changes in commercial and real estate markets crash and commercial premium rates that could have an impact on revenue, results of investigations by regulators and investigations related to compliance with the U.S. Foreign Corrupt Practices Act and non-US laws against corruption, the impact of the investigation initiated by Attorneys General of American States, the American state insurance regulators, U.S. federal prosecutors, federal regulations of the United States, and the regulatory authorities in the UK and other countries, the impact of and class actions, including client class actions, securities class actions, derivative actions, ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, our ability to successfully integrate Benfield and achieve the anticipated benefits of the merger Benfield. Further information concerning the Company and its business, including factors that could materially affect the financial results of the company, is contained in the Company filings with the Securities and Exchange Commission.
This press release includes information relating to the growth of turnover and several other measures, including expenses, margins and earnings per share, which exclude the effects of restructuring charges and certain other outstanding items that have affected the results for the same period. Organic revenue growth excludes from income the impact of foreign exchange, acquisitions, divestitures, transfers between business units, investment income, reimbursable expenses and unusual items. Reconciliation is provided in the tables attached. Organic sales growth of complementary information and additional measures to exclude the effects of restructuring charges and certain other elements have no impact on net income or any other amount reported under GAAP. Management believes that these measures are important to make period comparisons and that this information is useful for investors. They must be considered in addition to, not instead of, the Company Consolidated Summary of Operations. Peers in the industry to provide additional information about their performance, although they May not make identical adjustments.
Investor Contact: Media Contact:
David Scott Malchow Prosperi
Vice President, Vice President,
Investor Relations Global Public Relations
312-381-3983 312-381-2485
Aon Corporation
Summary of Consolidated Results (Unaudited)
Fourth quarter ended Twelve months ended
-------------------------------------------------- ------
(in millions, except December 31 December 31 December 31 Percent 31 Percent in December
per share data) 2008 2007 Change 2008 2007 Change
-------- -------- --------- --------- --------- ------- --
Revenue
-------
Commissions,
fresh and
Other $ 1873 $ 1943 (4)% $ 7366 $ 7066 4%
Investment
income 51 63 (19) 265 293 (10)
-------- -------- --------- --------- --------- ------- --
Total
Revenue 1924 2006 (4) 7631 7359 4
-------- -------- --------- --------- --------- ------- --
Expenditure
--------
Compensation
and benefits 1153 1157-4581 4341 6
Other
expenditure 455 496 (8) 1800 1712 5
Depreciation
and
Depreciation 65 52 25 222 193 15
-------- -------- --------- --------- --------- ------- --
Total
Operating
Expenditures 1673 1705 (2) 6603 6246 6
-------- -------- --------- --------- --------- ------- --
Operating income 251 301 (17) 1028 1113 (8)
Interest
expenses 30 36 (17) 126 138 (9)
Other
(income)
costs 48 (6) N / A 39 (35) N / A
-------- -------- --------- --------- --------- ------- --
Income from
continues
operations
before
provision
for income taxes 173 271 (36) 863 1010 (15)
Provision for
income tax (1) 50 83 (40) 242 348 (30)
-------- -------- --------- --------- --------- ------- --
Income from
continues
123 188 operations (35) 621 662 (6)
Discontinued
operations
Income (loss)
from
abandoned
Operations (184) 77 N / A 1256 330 281
Provision for
(enjoy)
income tax (2) (71) 58 N / A 399 128 212
-------- -------- --------- --------- --------- ------- --
Revenue
(loss)
abandoned
Operations (113) 19 N / A 857 202 324
-------- -------- --------- --------- --------- ------- --
Net income $ 10 $ 207 (95)% $ 1478 $ 864 71%
======== ======== ========= ========= ========= ======= =
Basic net income
(loss) per share:
Continue
operations $ 0.45 $ 0.62 (27)% $ 2.18 $ 2.23 (2)%
Discontinued
operations (0.41) 0.07 N / A 3.00 0.67 348
-------- -------- --------- --------- --------- ------- --
Net income $ 0.04 $ 0.69 (94)% $ 5.18 $ 2.90 79%
======== ======== ========= ========= ========= ======= =
Diluted net earnings
(loss) per share:
Continue
operations $ 0.43 $ 0.58 (26)% $ 2.06 $ 2.07 -%
Discontinued
operations (0.40) 0.06 N / A 2.85 0.62 360
-------- -------- --------- --------- --------- ------- --
Net income $ 0.03 $ 0.64 (95)% $ 4.91 $ 2.69 83%
======== ======== ========= ========= ========= ======= =
Weighted average
Shares
outstanding --
Diluted 288.1 324.1 (11)% 300.9 323.0 (7)%
======== ======== ========= ========= ========= ======= =
(1) tax rate from continuing operations is 28.9% and 30.6% for the fourth
quarters ended December 31, 2008 and 2007, respectively, and 28.0% and
34.5% for the twelve months ended December 31, 2008 and 2007,
respectively.
(2) tax rate for discontinued operations is 38.6% and 75.3% for
fourth quarters ended December 31, 2008 and 2007, respectively, and
31.8% and 38.8% for the twelve months ended December 31, 2008 and
2007, respectively.
Aon Corporation
Income from Continuing Operations (Unaudited)
Fourth quarter ended
-------------------------------------------------- --------
Less:
Less: Acquisitions, Organic
Dec. 31, Dec. 31, as a percentage of revenue currency Disposals
(in millions) 2008 2007 Change Growth impact and other (1)
-------- ------- ------------ -------- ------ --------- ---
Commissions,
Fees and other
---------------
Risks and
Insurance
Brokerage
Services:
Americas $ 642 $ 650 (1) (4)%% -% 3%
United
UK 196 223 (12) (14) 1 1
Europe,
Medium --
East &
Africa 333 353 (6) (9) 2 1
Asia-Pacific 119 140 (15) (16) (2) 3
Reinsurance
Brokerage
and
Related
Services 247 210 18 (5) 21 2
-------- ------- ------------ -------- ------ --------- ---
Total Risk
and
Insurance
Brokerage
Services 1537 1576 (2) (8) 4 2
-------- ------- ------------ -------- ------ --------- ---
Consulting:
Consulting
services 289 313 (8) (9) (3) 4
Outsourcing 52 59 (12) (10) 2 (4)
-------- ------- ------------ -------- ------ --------- ---
Total
Consulting 341 372 (8) (9) (2) 3
-------- ------- ------------ -------- ------ --------- ---
Total
Operating
Segments $ 1878 $ 1948 (4)% (8)% 2% 2%
======== ====== ======= ======== ========= ============ ===
Investment
Revenue
----------
Risks and
Insurance
Brokerage
Services $ 44 $ 51 (14)%
Consulting 1 1 --
-------- ------- ------
Total
Operating
Segments $ 45 $ 52 (13)%
======== ====== =======
Total Revenue
-------------
Risks and
Insurance
Brokerage
Services $ 1,581 $ 1,627 (3)%
Consulting 342 373 (8)
Unallocated 6 11 (45)
Cross (5) (5) --
-------- ------- ------
Total $ 1,924 $ 2,006 (4)%
======== ====== =======
(1) Organic revenue growth excludes the impact of foreign currency,
acquisitions, cessions, les transferts, les dépenses remboursables et
éléments inhabituels.
Aon Corporation
Revenu d'opérations courantes (non vérifié)
Douze mois clos
-------------------------------------------------- ---------
Moins:
Moins: Acquisitions, Organic
Dec. 31, Dec. 31, en pourcentage des recettes de devises Désinvestissements
(en millions) 2008 2007 Variation Croissance impact et autres (1)
-------- ------- ------ -------- ------------ --------- --
Commissions,
Frais et autres
---------------
Des risques et des
Assurance
Courtage
Services:
Amériques $ 2280 $ 2259 1% -% -% 1%
United
Uni 742 768 (3) (4) 1 --
Europe,
Moyen -
East &
Afrique 1521 1341 13 7 2 4
Asie
Pacifique 492 483 2 1 (1) 2
Réassurance
de courtage
et
connexes
services 1003 901 11 3 7 1
-------- ------- ------ -------- ------------ --------- --
Total
Des risques et des
Assurance
Courtage
Services 6038 5752 5 2 1 2
-------- ------- ------ -------- ------------ --------- --
Consulting:
Consulting
services 1139 1107 3 - (2) 5
Outsourcing 214 236 (9) (2) - (7)
-------- ------- ------ -------- ------------ --------- --
Total
Consulting 1353 1343 1 - (2) 3
-------- ------- ------ -------- ------------ --------- --
Total
D'exploitation
Segments $ 7391 $ 7095 4% 1% 1% 2%
======== ====== ======= ======== ========= ============ ==
Investissement
Revenu
----------
Des risques et des
Assurance
Courtage
Services $ 192 $ 205 (6)%
Consulting 5 9 (44)
-------- ------- ------
Total
D'exploitation
Segments $ 197 $ 214 (8)%
======== ====== =======
Total des revenus
-------------
Des risques et des
Assurance
Courtage
Services $ 6.230 $ 5.957 5%
Consulting 1.358 1.352 --
Non alloué 68 79 (14)
Intersectorielles (25) (29) (14)
-------- ------- ------
Total $7,631 $7,359 4%
======== ======= ======
(1) Organic revenue growth excludes the impact of foreign exchange,
acquisitions, divestitures, transfers, reimbursable expenses and
unusual items.
Aon Corporation - Segments (Unaudited)
Risk and Insurance Brokerage Services - Continuing Operations
-------------------------------------------------------------
Fourth Quarter Ended Twelve Months Ended
--------------------------- -----------------------------
Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
(millions) 2008 2007 Change 2008 2007 Change
-------- --------- -------- --------- --------- --------
Revenue
-------
Commissions,
fees and
other $1,537 $1,576 (2)% $6,038 $5,752 5%
Investment
income 44 51 (14) 192 205 (6)
-------- --------- -------- --------- --------- --------
Total
revenue 1,581 1,627 (3) 6,230 5,957 5
-------- --------- -------- --------- --------- --------
Expenses
--------
Compensation
and
benefits 934 923 1 3,707 3,457 7
Other general
expenses 426 434 (2) 1,659 1,525 9
-------- --------- -------- --------- --------- --------
Total
operating
expenses 1,360 1,357 - 5,366 4,982 8
-------- --------- -------- --------- --------- --------
Operating
income 221 270 (18) 864 975 (11)
Other
(income)
expense 4 (6) N/A (10) (35) (71)
-------- --------- -------- --------- --------- --------
Income before
provision
for income
tax $217 $276 (21)% $874 $1,010 (13)%
======== ========= ======== ========= ========= ========
Pretax income
margin 13.7% 17.0% 14.0% 17.0%
Consulting -
Continuing
Operations Fourth Quarter Ended Twelve Months Ended
------------ --------------------------- -----------------------------
Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
(millions) 2008 2007 Change 2008 2007 Change
-------- --------- -------- --------- --------- --------
Revenue
-------
Commissions,
fees and
other $341 $372 (8)% $1,353 $1,343 1%
Investment
income 1 1 - 5 9 (44)
-------- --------- -------- --------- --------- --------
Total
revenue 342 373 (8) 1,358 1,352 -
-------- --------- -------- --------- --------- --------
Expenses
--------
Compensation
and benefits 203 219 (7) 815 823 (1)
Other general
expenses 84 94 (11) 331 340 (3)
-------- --------- -------- --------- --------- --------
Total
operating
expenses 287 313 (8) 1,146 1,163 (1)
-------- --------- -------- --------- --------- --------
Operating
income 55 60 (8) 212 189 12
Other
(income)
expense - - - (1) - N/A
-------- --------- -------- --------- --------- --------
Income before
provision
for income
tax $55 $60 (8)% $213 $189 13%
======== ========= ======== ========= ========= =========
Pretax income
margin 16.1% 16.1% 15.7% 14.0%
Reconciliation of segment income before
provision for income tax to income from
continuing operations before provision
for income tax:
Fourth Quarter Ended Twelve Months Ended
--------------------------- -----------------------------
Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
(millions) 2008 2007 Change 2008 2007 Change
-------- --------- -------- --------- --------- --------
Segment income
before
provision for
income tax
Risk and
Insurance
Brokerage
Services $217 $276 (21)% $874 $1,010 (13)%
Consulting 55 60 (8) 213 189 13
-------- --------- -------- --------- --------- --------
Total
segment
income
before
provision
for income
tax 272 336 (19) 1,087 1,199 (9)
Unallocated
investment
income 6 11 (45) 68 79 (14)
Unallocated
expenses (75) (40) 88 (166) (130) 28
Interest
expense (30) (36) (17) (126) (138) (9)
-------- --------- -------- --------- --------- --------
Income from
continuing
operations
before
provision
for income
tax $173 $271 (36)% $863 $1,010 (15)%
======== ========= ======== ========= ========= ========
Pretax
income
margin 9.0% 13.5% 11.3% 13.7%
Aon Corporation
Reconciliation of the Impact of Non-GAAP Measures on Segments and Diluted
Earnings Per Share (Unaudited) (1)
Fourth Quarter Ended Twelve Months Ended
December 31, 2008 December 31, 2008
(millions------------------------------- -------------------------------
except Risk and Unallo- Risk and Unallo-
per Insurance cated Insurance cated
share Brokerage Cons- Income & Brokerage Cons- Income &
data) Services ulting Expense Total Services ulting Expense Total
Revenue --------- ------- ------- ------ --------- ------- ------- -----
as
reported $1,581 $342 $1 $1,924 $6,230 $1,358 $43 $7,631
========= ======= ======= ====== ========= ======= ======= =====
Income
(loss)
from
continuing
operations
before
provision
for income
tax - as
reported $217 $55 $(99) $173 $874 $213 $(224) $863
Restruc-
turing
charges
(2005
and
2007
plans) 78 9 - 87 237 17 - 254
Pension
curtailment 6 1 1 8 6 1 1 8
Anti-
bribery
and
compliance
initia-
tives 11 - - 11 42 - - 42
Benfield
costs 2 - 44 46 2 - 50 52
Gain on
sale
of
land - - - - (5) - - (5)
--------- ------- ------- ------ --------- ------- ------- -----
Income
(loss)
from
continuing
operations
before
provision
for income
tax - as
adjusted $314 $65 $(54) 325 $1,156 $231 $(173) 1,214
========= ======= ======= ========= ======= =======
Provision
for income
taxes (2) 93 340
------ -----
Income from
continuing
operations -
as adjusted $232 $874
====== =====
Diluted
earnings
per share
from
continuing
operations -
as
adjusted $0.81 $2.90
====== =====
Weighted
average
common
shares
outstanding -
diluted 288.1 300.9
====== =====
Pretax
income
margins -
as
adjusted 19.9% 19.0% N/A 16.9% 18.6% 17.0% N/A 15.9%
========= ======= ======= ====== ========= ======= ======= =====
Fourth Quarter Ended Twelve Months Ended
December 31, 2007 December 31, 2007
(millions------------------------------- -------------------------------
except Risk and Unallo- Risk and Unallo-
per Insurance cated Insurance cated
share Brokerage Cons- Income & Brokerage Cons- Income &
data) Services ulting Expense Total Services ulting Expense Total
Revenue --------- ------- ------- ------ --------- ------- ------- -----
as
reported $1,627 $373 $6 $2,006 $5,957 $1,352 $50 $7,359
========= ======= ======= ====== ========= ======= ======= =====
Income
(loss)
from
continuing
operations
before
provision
for income
tax - as
reported $276 $60 $(65) $271 $1,010 $189 $(189) $1,010
Restruc-
turing
charges
(2005
and
2007
plans) 30 4 - 34 74 11 - 85
Gain on
sale of
businesses (6) - - (6) (36) - - (36)
Resolution
of U.K.
balance
sheet
reconcil-
iation
difference - - 15 15 - - 15 15
Reinsur-
ance
litiga-
tion - - - - 21 - - 21
--------- ------- ------- ------ --------- ------- ------- -----
Income (loss)
from
continuing
operations
before
provision
for income
tax - as
adjusted $300 $64 $(50) 314 $1,069 $200 $(174) 1,095
========= ======= ======= ========= ======= =======
Provision
for income
taxes (2) 93 348
------ -----
Income from
continuing
operations -
as adjusted $221 $747
====== =====
Diluted
earnings per
share from
continuing
operations -
as adjusted $0.68 $2.33
====== =====
Weighted average
common shares
outstanding -
diluted 324.1 323.0
====== =====
Pretax
income
margins -
as
adjusted 18.4% 17.2% N/A 15.7% 17.9% 14.8% N/A 14.9%
========= ======= ======= ====== ========= ======= ======= =====
(1) Certain noteworthy items impacting revenue and pretax income in 2008
and 2007 are described in this schedule. The revenue, income (loss)
from continuing operations before provision for income tax, diluted
earnings per share from continuing operations and related margins
shown with the caption "as adjusted" are non-GAAP measures.
(2) Tax rate from continuing operations is 28.6% and 29.6% for the fourth
quarters ended December 31, 2008 and 2007, respectively, and 28.0% and
31.8% for the twelve months ended December 31, 2008 and 2007,
respectively.
Aon Corporation
2007 Restructuring Plan (Unaudited)
By Type: Actual Estimated
----------------------------------------- ---------
Nine 4th Full Total
Months Quarter Year Incurred
(millions) 2007 2008 2008 2008 to Date Total
----------------------------------------- ---------
Workforce reduction
(Compensation and
benefits) $17 $118 $48 $166 $183 $330
Lease consolidation
(Other general
expenses) 22 25 13 38 60 134
Asset impairments
(Depreciation and
amortization) 4 13 5 18 22 45
Other costs
associated with
restructuring
(Other general
expenses) 3 9 20 29 32 41
----------------------------------------- ---------
Total restructuring
and related
expenses $46 $165 $86 $251 $297 $550
========================================= =========
By Segment: Actual Estimated
----------------------------------------- ---------
Nine 4th Full Total
Months Quarter Year Incurred
(millions) 2007 2008 2008 2008 to Date Total
----------------------------------------- ---------
Risk and Insurance
Brokerage Services $41 $157 $77 $234 $275 $503
Consulting 5 8 9 17 22 47
----------------------------------------- ---------
Total restructuring
and related
expenses $46 $165 $86 $251 $297 $550
========================================= =========
Benfield Restructuring
Plan (Unaudited)
By Type: Estimated
------------------------
Non-
Purchase
Purchase Account-
(millions) Accounting ing Total
------------------------
Workforce reduction
(Compensation and
benefits) $74 $52 $126
Lease consolidation
(Other general
expenses) 28 21 49
Asset impairments
(Depreciation and
amortization) - 8 8
Other costs
associated with
restructuring
(Other general
expenses) 2 - 2
------------------------
Total restructuring
and related
expenses $104 $81 $185
========================
Aon Corporation
Consolidated Summary of Operations - Reclassified for Discontinued
Operations (Unaudited)
2007 2008
-------------------------------- ---------------------------------
(millions
except
per 1st 2nd 3rd 4th 1st 2nd 3rd 4th
share Quar- Quar- Quar- Quar- Full Quar- Quar- Quar- Quar- Full
data) ter ter ter ter Year ter ter ter ter Year
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Revenue
-------
Comm-
issions,
fees
and
oth-
er $1,702 $1,750 $1,671 $1,943 $7,066 $1,848 $1,889 $1,756 $1,873 $7,366
Invest-
ment
income 67 88 75 63 293 57 67 90 51 265
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total
reve-
nue 1,769 1,838 1,746 2,006 7,359 1,905 1,956 1,846 1,924 7,631
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Expenses
--------
Compen-
sation
and
bene-
fits 1,040 1,097 1,047 1,157 4,341 1,154 1,143 1,131 1,153 4,581
Other
general
expen-
ses 413 413 390 496 1,712 419 503 423 455 1,800
Deprecia-
tion
and
amorti-
zation 47 46 48 52 193 50 58 49 65 222
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total
opera-
ting
expen-
ses 1,500 1,556 1,485 1,705 6,246 1,623 1,704 1,603 1,673 6,603
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Operating
income 269 282 261 301 1,113 282 252 243 251 1,028
Interest
expense 35 34 33 36 138 33 31 32 30 126
Other
(income)
expense - (29) - (6) (35) (4) (2) (3) 48 39
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Income
from
continuing
operations
before
provision
for
income
tax 234 277 228 271 1,010 253 223 214 173 863
Provision
for
income
tax 73 97 95 83 348 76 57 59 50 242
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Income
from
continuing
opera-
tions 161 180 133 188 662 177 166 155 123 621
Discontinued
operations
Income
(loss)
from
discon-
tinued
opera-
tions 79 91 83 77 330 66 1,431 (57) (184) 1,256
Provision
for
(benefit
from)
income
tax 27 31 12 58 128 25 464 (19) (71) 399
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Income
(loss)
from
discont-
inued
opera-
tions 52 60 71 19 202 41 967 (38) (113) 857
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Net
income $213 $240 $204 $207 $864 $218 $1,133 $117 $10 $1,478
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Basic
net
income
(loss)
per
share:
Continu-
ing
operat-
ions $0.54 $0.61 $0.45 $0.62 $2.23 $0.58 $0.57 $0.57 $0.45 $2.18
Discont-
inued
operat
ions 0.17 0.20 0.24 0.07 0.67 0.14 3.34 (0.14) (0.41) 3.00
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Net
in-
come $0.71 $0.81 $0.69 $0.69 $2.90 $0.72 $3.91 $0.43 $0.04 $5.18
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Dilutive
net
income
(loss)
per
share:
Contin-
uing
operat-
ions $0.50 $0.57 $0.42 $0.58 $2.07 $0.55 $0.54 $0.53 $0.43 $2.06
Discont-
inued
opera-
tions 0.16 0.18 0.22 0.06 0.62 0.13 3.17 (0.13) (0.40) 2.85
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Net
in-
come $0.66 $0.75 $0.64 $0.64 $2.69 $0.68 $3.71 $0.40 $0.03 $4.91
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Weighted
average
common
shares
out-
standing -
di-
luted 324.4 321.9 321.5 324.1 323.0 319.8 305.3 290.3 288.1 300.9
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Aon Corporation
Segments - Reclassification for Discontinued Operations (Unaudited)
2007 2008
---------------------------------- ---------------------------
1st 2nd 3rd 4th 1st 2nd 3rd
Quar- Quar- Quar- Quar- Full Quar- Quar- Quar- Nine
(millions) ter ter ter ter Year ter ter ter Months
------ ------ ------ ------ ------ ------ ------ ------ ------
Revenue
-------
Risk and
insurance
brokerage
services $1,429 $1,490 $1,411 $1,627 $5,957 $1,566 $1,610 $1,473 $4,649
Consulting 329 325 325 373 1,352 343 336 337 1,016
Unallocated
As reported 23 32 21 13 89 7 18 41 66
Less:
reclass-
ification
à
discont-
inued
opera-
tions (2) (3) (3) (2) (10) (2) (1) (1) (4)
------ ------ ------ ------ ------ ------ ------ ------ ------
As
reclass-
ified 21 29 18 11 79 5 17 40 62
Inter-
segment (10) (6) (8) (5) (29) (9) (7) (4) (20)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total $1,769 $1,838 $1,746 $2,006 $7,359 $1,905 $1,956 $1,846 $5,707
====== ====== ====== ====== ====== ====== ====== ====== ======
Income
(loss)
before
income
tax
-------
Risk
and
insurance
brokerage
services $234 $272 $228 $276 $1,010 $238 $231 $188 $657
Consulting 47 44 38 60 189 63 43 52 158
Unallocated
As reported (48) (41) (43) (68) (200) (50) (52) (28) (130)
Less:
reclass-
ification
à
dis-
continued
opera-
tions 1 2 5 3 11 2 1 2 5
------ ------ ------ ------ ------ ------ ------ ------ ------
As
reclass-
ified (47) (39) (38) (65) (189) (48) (51) (26) (125)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total $234 $277 $228 $271 $1,010 $253 $223 $214 $690
====== ====== ====== ====== ====== ====== ====== ====== ======
Income
from
continuing
operations
before
income
tax -
margins
--------
Risk and
insurance
brokerage
services 16.4% 18.3% 16.2% 17.0% 17.0% 15.2% 14.3% 12.8% 14.1%
Consulting 14.3% 13.5% 11.7% 16.1% 14.0% 18.4% 12.8% 15.4% 15.6%
Total
As
reported 13.2% 14.9% 12.8% 13.3% 13.6% 13.2% 11.3% 11.5% 12.0%
As
reclass-
ified 13.2% 15.1% 13.1% 13.5% 13.7% 13.3% 11.4% 11.6% 12.1%
Aon Corporation
Property and Casualty Run-off Insurance Operations (Unaudited)
2007
----------------------------------------
1st 2nd 3rd 4th Full
(millions except per share data) Quarter Quarter Quarter Quarter Year
------- ------- ------- -------- -------
Revenue
-------
Commissions, fees and other $- $1 $1 $1 $3
Investment income 2 2 2 1 7
------- ------- ------- -------- -------
Total revenue 2 3 3 2 10
------- ------- ------- -------- -------
Expenses
--------
Compensation and benefits 2 1 1 2 6
Other general expenses 1 4 7 3 15
------- ------- ------- -------- -------
Total operating expenses 3 5 8 5 21
------- ------- ------- -------- -------
Operating loss (1) (2) (5) (3) (11)
Other expense - - - - -
------- ------- ------- -------- -------
Loss before benefit from income
tax (1) (2) (5) (3) (11)
Benefit from income tax - (1) (2) (1) (4)
------- ------- ------- -------- -------
Net loss $(1) $(1) $(3) $(2) $(7)
======= ======= ======= ======== =======
Basic net loss per share $(0.01) $(0.01) $(0.01) $(0.01) $(0.02)
======= ======= ======= ======== =======
Dilutive net loss per share $- $- $(0.01) $- $(0.02)
======= ======= ======= ======== =======
Weighted average common shares
outstanding - diluted 324.4 321.9 321.5 324.1 323.0
======= ======= ======= ======== =======
2008
---------------------------------------
1st 2nd 3rd 4th Full
(millions except per share data) Quarter Quarter Quarter Quarter Year
-------- ------- ------- -------- -----
Revenue
Commissions, fees and other $- $- $- $1 $1
Investment income 2 1 1 1 5
-------- ------- ------- -------- -----
Total revenue 2 1 1 2 6
-------- ------- ------- -------- -----
Expenses
Compensation and benefits 1 2 1 - 4
Other general expenses 3 - 2 (3) 2
-------- ------- ------- -------- -----
Total operating expenses 4 2 3 (3) 6
-------- ------- ------- -------- -----
Operating income (loss) (2) (1) (2) 5 -
Other expense - - - 191 191
-------- ------- ------- -------- -----
Loss before benefit from income
tax (2) (1) (2) (186) (191)
Benefit from income tax (1) - - (73) (74)
-------- ------- ------- -------- -----
Net loss $(1) $(1) $(2) $(113) $(117)
======== ======= ======= ======== =====
Basic net loss per share $(0.01) $- $(0.01) $(0.41) $(0.41)
======== ======= ======= ======== =====
Dilutive net loss per share $- $- $(0.01) $(0.39) $(0.39)
======== ======= ======= ======== =====
Weighted average common shares
outstanding - diluted 319.8 305.3 290.3 288.1 300.9
======== ======= ======= ======== =====
Aon Corporation
Condensed Consolidated Statements of Financial Position
As of
----------------------------------
(millions) Dec. 31, 2008 Dec. 31, 2007 (2)
---------- -------------- ------------------
(Unaudited)
ASSETS
------
CURRENT ASSETS
Cash $657 $584
Short-term investments 579 1,120
Receivables 1,992 1,993
Fiduciary assets (1) 10,678 9,498
Other current assets 480 276
Assets held for sale 237 4,601
-------------- ------------------
Total Current Assets 14,623 18,072
Goodwill 5,637 4,915
Other intangible assets 779 204
Fixed assets, net 451 497
Long-term investments 342 332
Other non-current assets 1,340 914
-------------- ------------------
TOTAL ASSETS $23,172 $24,934
============== ==================
LIABILITIES AND STOCKHOLDERS'
EQUITY
------------------------------
CURRENT LIABILITIES
Fiduciary liabilities $10,678 $9,498
Short-term debt 105 252
Accounts payable and accrued
liabilities 1,536 1,413
Other current liabilities 438 293
Liabilities held for sale 142 3,172
-------------- ------------------
Total Current Liabilities 12,899 14,628
Long-term debt 1,872 1,893
Pension, post employment and post
retirement liabilities 1,694 1,251
Other non-current liabilities 1,393 941
-------------- ------------------
TOTAL LIABILITIES 17,858 18,713
TOTAL STOCKHOLDERS' EQUITY 5,314 6,221
-------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $23,172 $24,934
============== ==================
(1) Includes short-term investments: 2008 - $3,204; 2007 - $3,122.
(2) Certain amounts have been reclassified to conform to the 2008
presentation.
SOURCE Aon Corporation
CONTACT: Investor, Scott Malchow, Vice President, Investor Relations, +1-312-381-3983, or Media, David Prosperi, Vice President, Global Public Relations, +1-312-381-2485, both of Aon Corporation
Copyright © 2009 PR Newswire - Increased total annual savings related to the 2007 restructuring program by $70 million to $370 million, and costs necessary to achieve savings by $100 million to $550 million - Increased total annual savings related to the 2007 restructuring program by $70 million to $370 million, and ...
- Increase in total annual savings related to restructuring program in 2007 to $ 70 million to $ 370 million, and costs required to achieve savings of $ 100 million to $ 550 million
- Increase in total annual savings related to restructuring program in 2007 to $ 70 million to $ 370 million, and costs required to achieve savings of $ 100 million to $ 550 million
CHICAGO, February 6 / PRNewswire-FirstCall / - Aon Corporation (NYSE: AOC) announced today its results for the fourth quarter and year ended December 31, 2008.
Net income decreased 95% to 10 million or $ 0.03 per share, compared with $ 207 million or $ 0.64 per share for the quarter last year, mainly due to s' expects $ 116 million after tax loss on the sale of the remaining insurance companies that are now included in discontinued operations, an increase in restructuring costs and costs related to the merger Benfield. Net income from continuing operations decreased by 35% to $ 123 million, or $ 0.43 per share, compared with $ 188 million or $ 0.58 per share for the prior year quarter. Net income from continuing operations per share, excluding certain items, increased 19% to $ 0.81 compared to $ 0.68 for the prior year quarter. Certain items that impacted fourth quarter results and comparisons with the prior year quarter are detailed in the reconciliation of non-GAAP measures on page 12 of this release.
"In the fourth quarter, we achieved solid results despite a very difficult market and economic environment. These results reflect the strength of our industry-leading, global network of resources and capacity, and continued progress in each of our key operating parameters. Organic growth was two percent, the adjusted pre-tax margin increased 120 basis points and adjusted earnings per share from continuing operations increased by 19%, "said Greg Case, President and CEO, Aon Corporation. "We begin 2009 in a strong position with a portfolio of commodities that is now aligned around risk and human capital solutions advice. Our expense initiatives and program delivery restructuring are significant margin improvement, while at the same funding investments in value-added services and capabilities to support our customers. Our balance sheet remained strong, which gave us the financial flexibility to effectively allocate capital, as emphasized by the recent merger with Benfield. All these actions support our belief in the underlying strength of Aon and our ongoing commitment to provide long term value for shareholders. "
SUMMARY OF FOURTH QUARTER
Total revenue declined 4% to $ 1.9 billion due to a decrease of 8% of foreign currency, an increase of 2% from acquisitions net of divestitures and organic growth in sales commissions and fees of 2%. Total expenditure increased by 1% or $ 16 million to $ 1.8 billion, including $ 155 million of the favorable impact of foreign currency translation, partially offset by an increase of $ 53 million in restructuring costs, $ 46 million of transaction costs Benfield, and $ 42 million of other expenses Benfield.
The fourth quarter includes the operating results of Benfield since the closing of the merger on November 28, and reflects $ 38 million revenue and $ 42 million of expenditure. The results of Benfield net income decreased by $ 0.01 per share in the fourth quarter.
Restructuring costs were $ 87 million in the fourth quarter compared to $ 34 million in the prior year quarter. An analysis of expenses related to restructuring by sector and type for both 2007 and Benfield restructuring programs are detailed on page 13 of this release.
The restructuring of the economies in the fourth quarter of 2007 related to the restructuring are estimated at $ 32 million compared to no material savings from the previous year quarter. Of the estimated restructuring savings in the fourth quarter of $ 27 million were related to the brokerage segment of the first reduction. In 2007, the restructuring program made approximately $ 78 million in accumulated savings in 2008. Before any reinvestment of savings, the restructuring program in 2007 is now expected to provide the cumulative rate of implementation of cost savings of approximately $ 240-265 million in 2009 and $ 370 million in 2010, mainly because of additional cost savings opportunities to streamline support functions globally.
While Benfield recently announced restructuring program is expected to achieve significant savings over the next three years, the Company realized savings from the no program for the fourth quarter. The Company expects the restructuring plan of result before tax costs of approximately $ 185 million over three years, part of which will be included in the purchase price allocation. Before any reinvestment of savings, Benfield restructuring program should report the cumulative cost savings of $ 33-41 million in 2009, $ 84-94 million in 2010 and $ 122 million in 2011.
Foreign currency translation decreased net earnings of $ 0.01 per share, compared to the prior year quarter primarily due to fluctuations of the U.S. dollar against most major currencies.
Effective tax rate on continuing operations decreased by 28.9% for the fourth quarter compared to 30.6% for the quarter last year primarily due to reductions in certain statutory tax rate and changes in the geographical distribution of income.
Average diluted shares outstanding were 288 million in the fourth quarter, compared to 324 million in the quarter last year, mainly attributable to the Company's share repurchase program.
Discontinued operations, after-tax loss was $ 113 million, or $ 0.40 per share, compared with after-tax income of $ 19 million or $ 0.06 per share for the prior year quarter. With the fourth quarter, the Company entered into an agreement to dispose of its property and operations of accident, and the results were classified as held for marketing and operations for the quarter. The loss after tax for the quarter is primarily attributable to a concentration of $ 116 million loss on the sale of these operations. The discontinued operations include the results of specialists in motor insurance (SIA) and the prior year quarter, the results of the AIS, Combined Insurance Company of America and Sterling Life Insurance.
SEGMENT REVIEW OF FOURTH QUARTER
Some items to note the revenue, income before tax and before tax margins in the fourth quarter of 2008 and 2007. The fourth quarter segment reviews below includes information on adjusting the income before tax and before tax margin, which is described in detail on the reconciliation of the impact of non-GAAP measures on the segments and diluted earnings per share "on page 12 of this release.
RISK AND INSURANCE BROKERAGE SERVICES
-------------------------------------
(in millions) Fourth quarter ended
Less:
------------------------- Less: Acquisitions, Organic
Commissions, Dec 31, Dec 31,% Currency Divestitures, Revenue
Taxes, Other 2008 2007 Change Impact other growth
------------ ------- ------- ------ -------- ---------- --- -------
Americas $ 642 $ 650 (1) (4)%% -% 3%
United Kingdom 196 223 (12) (14) 1 1
EMEA 333 353 (6) (9) 2 1
Asia-Pacific 119 140 (15) (16) (2) 3
Reinsurance 247 210 18 (5) 21 2
------- ------- ------- ------- -------- -------------
Sub-Total $ 1537 $ 1576 (2)% (8)% 4% 2%
------- ------- ------- ------- -------- -------------
Investment Income $ 44 $ 51 (14%)
------- ------- -------
Total income $ 1,581 $ 1,627 (3)%
======= ======= =======
Risk and Insurance Brokerage Services total revenue decreased by 3% to $ 1.6 billion compared to the previous year due to a quarter of 8% of the negative impact of foreign currencies and a decrease of 14% of investment income, partially offset by an increase of 4% from acquisitions net of provisions and 2% organic growth in income from commissions and fees. Americas domestic sales increased by 3%, reflecting strong growth in U.S. retail and strong growth in Latin America. United Kingdom, revenue increased 1% due mainly to the growth of the captive. EMEA internal sales increased 1% due to growth in continental Europe and emerging markets. Organic sales in Asia Pacific grew by 3%, reflecting strong growth in most Asian markets, partially offset by the impact of certain regulatory changes in Japan. Internal reinsurance turnover increased by 2% mainly due to global growth and optional treaty placements, partially offset by soft market conditions.
Fourth quarter ended
------------------------
(in millions) Dec 31, Dec 31,%
2008 2007 Change
-------- -------- -------
Income $ 1581 $ 1627 (3)%
Expenditure
Compensation and benefits 934 923 1
Other expenses 426 434 (2)
-------- -------- -------
Total operating expenses 1360 1357 --
Operating income 221 270 (18%)
Other (income) expense 4 (6) N / A
-------- -------- -------
Income before taxes $ 217 $ 276 (21%)
======= ======== ========
Pre-tax margin 13.7% 17.0%
Income before tax - adjusted $ 314 $ 300 5%
Pre-tax margin - adjusted 19.9% 18.4%
Total operating expenses for the fourth quarter increased $ 3 million for the prior year quarter. The increase of $ 3 million increase includes a $ 48 million of restructuring costs, $ 40 million of Benfield operating expenses and $ 11 million to the comments above under the Foreign Corrupt Practices Act (FCPA) and similar laws in other countries and compliance initiatives, primarily offset by $ 124 million of the favorable impact of foreign currency translation of $ 27 million benefit related to restructuring program in 2007, and $ 33 million profit due mainly to an increase in dollars in commissions and fees receivable in the UK This service is currently better reflects a continuing relationship between the U.S. dollar and pound sterling costs for the businesses in the UK market .
Fourth quarter income before tax decreased by 21% to 217 million. Adjusting for certain items on page 12 of this release, the income before tax increased by 5% or $ 14 million to $ 314 million and the margin before tax increased by 150 basis points to 19.9 % over the quarter last year due mainly to the benefits of the 2007 restructuring program and other operational improvements, partially offset by $ 21 million related to the adverse impact line adjustments in some European countries and $ 7 million of lower investment income.
Brokerage results for the fourth quarter include $ 38 million revenue and $ 2 million pre-tax loss of Benfield. Benfield results of operations have had a negative impact of 60 basis points over the adjusted pre-tax margin brokerage.
CONSULTING
----------
(in millions) Fourth Quarter
Less Ended:
----------------- Less: Acquisitions, Organic
Commissions, Dec 31, Dec 31,% Currency Divestitures, Revenue
Taxes, Other 2008 2007 Change Impact other growth
----------- ------- ------- ------ -------- ----------- --- -------
Services $ 289 $ 313 (8)% (9)% (3)% 4%
Outsourcing 52 59 (12) (10) 2 (4)
------ ------- ------- -------- ------- --------------
Subtotal $ 341 $ 372 (8)% (9)% (2)% 3%
------ ------- ------- -------- ------- --------------
Investment income $ 1 $ 1 -%
------- ------- ------
Total Revenues $ 342 $ 373 (8)%
====== ======= =======
Consulting Total revenue decreased 8% to $ 342 million from the previous year due to a quarter, 9% of the adverse impact of currency, a reduction of 2% from acquisitions net of divestitures, partially offset by 3% organic growth in income from commissions and fees. Internal revenue services has increased by 4%, reflecting the growth of retirement and health benefits counseling. Internal turnover in Outsourcing declined 4% due to the previously announced termination of a major outsourcing contract, partially offset by modest growth in benefits outsourcing.
Fourth quarter ended
------------------------
(in millions) Dec 31, Dec 31,%
2008 2007 Change
------ -------- --------
Income $ 342 $ 373 (8)%
Expenditure
Compensation and benefits 203 219 (7)
Other expenses 84 94 (11)
------ -------- --------
Total operating expenses 287 313 (8)
Operating income 55 60 (8)%
Other (income) expense - - --
------ -------- --------
Income before taxes $ 55 $ 60 (8)%
======== ======== ======
Pre-tax margin of 16.1% to 16.1%
Income before tax - adjusted $ 65 $ 64 2%
Pre-tax margin - adjusted 19.0% 17.2%
Compensation and benefits for the fourth quarter decreased 7% or $ 16 million last year quarter, including $ 18 million favorable impact of currency conversion and benefits related to restructuring program in 2007, partially offset by a increase of $ 4 million in restructuring costs. Other expenses decreased 11% or $ 10 million compared to the prior year quarter, including $ 7 million of the favorable impact of currency conversion and benefits related to restructuring program in 2007.
Income before tax for the fourth quarter decreased by 8% to $ 55 million $ due to a decrease of 8 million of foreign exchange. Pre-tax margin was 16.1%, similar to the prior year quarter. Adjusting for certain items on page 12, income before tax increased by 2% to 65 million before tax margin of 180 basis points increased by 19.0%.
FREE INCOME AND EXPENSES
------------------------------
Fourth quarter ended
-----------------------
(in millions) Dec 31, Dec 31,%
2008 2007 Change
------- ------- ------
Segment revenue
before taxes $ 272 $ 336 (19%)
Unallocated investment income 6 11 (45)
Unallocated expenses (75) (40) 88
Interest expense (30) (36) (17)
------- ------- ------
Income from continuing
operations before taxes $ 173 $ 271 (36%)
====== ======= =======
Unallocated investment income for the fourth quarter decreased $ 5 million to $ 6 million compared to the prior year quarter primarily due to the timing of distributions of certain private equity funds. Unallocated increased $ 35 million to 75 million per quarter last year primarily due to $ 44 million to cover costs relating to the transaction Benfield. Interest expense decreased $ 6 million to 30 million in the prior year quarter due to fluctuations in foreign currencies and lower average interest rate on outstanding debt.
SUMMARY OF THE YEAR 2008
Total revenue for 2008 rose 4% to $ 7.6 billion with organic revenue growth of 2%. Risk and Insurance Brokerage Services total revenue increased 5% to 6.2 billion with organic growth of turnover in commissions and fees of 2%. Consulting revenue total was similar to the previous year, with organic growth of revenues from commissions and fees of 3%.
Net income for 2008 increased 71% to $ 1.5 billion, compared to $ 864 million for the previous year. Net income from continuing operations decreased by 6% to $ 621 million, compared with $ 662 million for the previous year.
EPS for 2008 increased 83% to $ 4.91 per share compared to $ 2.69 per share for the previous year. EPS from continuing operations was $ 2.06 against $ 2.07 for the previous year. EPS from continuing operations, excluding certain items, increased 24% to $ 2.90 compared to $ 2.33 for the previous year. Some items that affected the entire year and comparing the results against the previous year are detailed in the reconciliation of the impact of non-GAAP measures on page 12.
During 2008, the Company has repurchased approximately 42.6 million shares for $ 1.9 billion at an average price of $ 45.08 per share. As of December 31, 2008, the Company had approximately $ 850 million remaining authorization to repurchase shares.
Conference Call and Webcast Details
The Company will host a conference call on Friday, February 6, 2009 at 7:30 am central time. Interested parties may listen to the conference call through a live audio webcast at http://www.aon.com.
About Aon
Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance brokerage and reinsurance, consulting and human capital. With over 37,000 employees worldwide, Aon readily provides the distinctive client value via innovative and effective risk management and productivity solutions. Our industry leading global resources and technical expertise are delivered locally through more than 500 offices in over 120 countries. Named the world's best broker by Euromoney magazine's 2008 Insurance Survey, Aon also ranked the highest on the Business Insurance list of the largest insurance brokers based on commercial retail, wholesale, of reinsurance and insurance brokerage revenues in 2008. H Best Aon deemed the number one insurance broker based on brokerage revenues in 2007 and 2008, Aon was voted best insurance intermediary, best reinsurance, and the best consulting firm in employee benefits in 2007 and 2008 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 relating 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 various factors. Potential factors that could impact results include: general economic conditions in different countries where we do business around the world, changes in equity and fixed income markets that could affect 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 schemes retirement, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives to generate cost savings, changes in commercial and real estate markets crash and commercial premium rates that could have an impact on revenue, results of investigations by regulators and investigations related to compliance with the U.S. Foreign Corrupt Practices Act and non-US laws against corruption, the impact of the investigation initiated by Attorneys General of American States, the American state insurance regulators, U.S. federal prosecutors, federal regulations of the United States, and the regulatory authorities in the UK and other countries, the impact of and class actions, including client class actions, securities class actions, derivative actions, ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, our ability to successfully integrate Benfield and achieve the anticipated benefits of the merger Benfield. Further information concerning the Company and its business, including factors that could materially affect the financial results of the company, is contained in the Company filings with the Securities and Exchange Commission.
This press release includes information relating to the growth of turnover and several other measures, including expenses, margins and earnings per share, which exclude the effects of restructuring charges and certain other outstanding items that have affected the results for the same period. Organic revenue growth excludes from income the impact of foreign exchange, acquisitions, divestitures, transfers between business units, investment income, reimbursable expenses and unusual items. Reconciliation is provided in the tables attached. Organic sales growth of complementary information and additional measures to exclude the effects of restructuring charges and certain other elements have no impact on net income or any other amount reported under GAAP. Management believes that these measures are important to make period comparisons and that this information is useful for investors. They must be considered in addition to, not instead of, the Company Consolidated Summary of Operations. Peers in the industry to provide additional information about their performance, although they May not make identical adjustments.
Investor Contact: Media Contact:
David Scott Malchow Prosperi
Vice President, Vice President,
Investor Relations Global Public Relations
312-381-3983 312-381-2485
Aon Corporation
Summary of Consolidated Results (Unaudited)
Fourth quarter ended Twelve months ended
-------------------------------------------------- ------
(in millions, except December 31 December 31 December 31 Percent 31 Percent in December
per share data) 2008 2007 Change 2008 2007 Change
-------- -------- --------- --------- --------- ------- --
Revenue
-------
Commissions,
fresh and
Other $ 1873 $ 1943 (4)% $ 7366 $ 7066 4%
Investment
income 51 63 (19) 265 293 (10)
-------- -------- --------- --------- --------- ------- --
Total
Revenue 1924 2006 (4) 7631 7359 4
-------- -------- --------- --------- --------- ------- --
Expenditure
--------
Compensation
and benefits 1153 1157-4581 4341 6
Other
expenditure 455 496 (8) 1800 1712 5
Depreciation
and
Depreciation 65 52 25 222 193 15
-------- -------- --------- --------- --------- ------- --
Total
Operating
Expenditures 1673 1705 (2) 6603 6246 6
-------- -------- --------- --------- --------- ------- --
Operating income 251 301 (17) 1028 1113 (8)
Interest
expenses 30 36 (17) 126 138 (9)
Other
(income)
costs 48 (6) N / A 39 (35) N / A
-------- -------- --------- --------- --------- ------- --
Income from
continues
operations
before
provision
for income taxes 173 271 (36) 863 1010 (15)
Provision for
income tax (1) 50 83 (40) 242 348 (30)
-------- -------- --------- --------- --------- ------- --
Income from
continues
123 188 operations (35) 621 662 (6)
Discontinued
operations
Income (loss)
from
abandoned
Operations (184) 77 N / A 1256 330 281
Provision for
(enjoy)
income tax (2) (71) 58 N / A 399 128 212
-------- -------- --------- --------- --------- ------- --
Revenue
(loss)
abandoned
Operations (113) 19 N / A 857 202 324
-------- -------- --------- --------- --------- ------- --
Net income $ 10 $ 207 (95)% $ 1478 $ 864 71%
======== ======== ========= ========= ========= ======= =
Basic net income
(loss) per share:
Continue
operations $ 0.45 $ 0.62 (27)% $ 2.18 $ 2.23 (2)%
Discontinued
operations (0.41) 0.07 N / A 3.00 0.67 348
-------- -------- --------- --------- --------- ------- --
Net income $ 0.04 $ 0.69 (94)% $ 5.18 $ 2.90 79%
======== ======== ========= ========= ========= ======= =
Diluted net earnings
(loss) per share:
Continue
operations $ 0.43 $ 0.58 (26)% $ 2.06 $ 2.07 -%
Discontinued
operations (0.40) 0.06 N / A 2.85 0.62 360
-------- -------- --------- --------- --------- ------- --
Net income $ 0.03 $ 0.64 (95)% $ 4.91 $ 2.69 83%
======== ======== ========= ========= ========= ======= =
Weighted average
Shares
outstanding --
Diluted 288.1 324.1 (11)% 300.9 323.0 (7)%
======== ======== ========= ========= ========= ======= =
(1) tax rate from continuing operations is 28.9% and 30.6% for the fourth
quarters ended December 31, 2008 and 2007, respectively, and 28.0% and
34.5% for the twelve months ended December 31, 2008 and 2007,
respectively.
(2) tax rate for discontinued operations is 38.6% and 75.3% for
fourth quarters ended December 31, 2008 and 2007, respectively, and
31.8% and 38.8% for the twelve months ended December 31, 2008 and
2007, respectively.
Aon Corporation
Income from Continuing Operations (Unaudited)
Fourth quarter ended
-------------------------------------------------- --------
Less:
Less: Acquisitions, Organic
Dec. 31, Dec. 31, as a percentage of revenue currency Disposals
(in millions) 2008 2007 Change Growth impact and other (1)
-------- ------- ------------ -------- ------ --------- ---
Commissions,
Fees and other
---------------
Risks and
Insurance
Brokerage
Services:
Americas $ 642 $ 650 (1) (4)%% -% 3%
United
UK 196 223 (12) (14) 1 1
Europe,
Medium --
East &
Africa 333 353 (6) (9) 2 1
Asia-Pacific 119 140 (15) (16) (2) 3
Reinsurance
Brokerage
and
Related
Services 247 210 18 (5) 21 2
-------- ------- ------------ -------- ------ --------- ---
Total Risk
and
Insurance
Brokerage
Services 1537 1576 (2) (8) 4 2
-------- ------- ------------ -------- ------ --------- ---
Consulting:
Consulting
services 289 313 (8) (9) (3) 4
Outsourcing 52 59 (12) (10) 2 (4)
-------- ------- ------------ -------- ------ --------- ---
Total
Consulting 341 372 (8) (9) (2) 3
-------- ------- ------------ -------- ------ --------- ---
Total
Operating
Segments $ 1878 $ 1948 (4)% (8)% 2% 2%
======== ====== ======= ======== ========= ============ ===
Investment
Revenue
----------
Risks and
Insurance
Brokerage
Services $ 44 $ 51 (14)%
Consulting 1 1 --
-------- ------- ------
Total
Operating
Segments $ 45 $ 52 (13)%
======== ====== =======
Total Revenue
-------------
Risks and
Insurance
Brokerage
Services $ 1,581 $ 1,627 (3)%
Consulting 342 373 (8)
Unallocated 6 11 (45)
Cross (5) (5) --
-------- ------- ------
Total $ 1,924 $ 2,006 (4)%
======== ====== =======
(1) Organic revenue growth excludes the impact of foreign currency,
acquisitions, cessions, les transferts, les dépenses remboursables et
éléments inhabituels.
Aon Corporation
Revenu d'opérations courantes (non vérifié)
Douze mois clos
-------------------------------------------------- ---------
Moins:
Moins: Acquisitions, Organic
Dec. 31, Dec. 31, en pourcentage des recettes de devises Désinvestissements
(en millions) 2008 2007 Variation Croissance impact et autres (1)
-------- ------- ------ -------- ------------ --------- --
Commissions,
Frais et autres
---------------
Des risques et des
Assurance
Courtage
Services:
Amériques $ 2280 $ 2259 1% -% -% 1%
United
Uni 742 768 (3) (4) 1 --
Europe,
Moyen -
East &
Afrique 1521 1341 13 7 2 4
Asie
Pacifique 492 483 2 1 (1) 2
Réassurance
de courtage
et
connexes
services 1003 901 11 3 7 1
-------- ------- ------ -------- ------------ --------- --
Total
Des risques et des
Assurance
Courtage
Services 6038 5752 5 2 1 2
-------- ------- ------ -------- ------------ --------- --
Consulting:
Consulting
services 1139 1107 3 - (2) 5
Outsourcing 214 236 (9) (2) - (7)
-------- ------- ------ -------- ------------ --------- --
Total
Consulting 1353 1343 1 - (2) 3
-------- ------- ------ -------- ------------ --------- --
Total
D'exploitation
Segments $ 7391 $ 7095 4% 1% 1% 2%
======== ====== ======= ======== ========= ============ ==
Investissement
Revenu
----------
Des risques et des
Assurance
Courtage
Services $ 192 $ 205 (6)%
Consulting 5 9 (44)
-------- ------- ------
Total
D'exploitation
Segments $ 197 $ 214 (8)%
======== ====== =======
Total des revenus
-------------
Des risques et des
Assurance
Courtage
Services $ 6.230 $ 5.957 5%
Consulting 1.358 1.352 --
Non alloué 68 79 (14)
Intersectorielles (25) (29) (14)
-------- ------- ------
Total $7,631 $7,359 4%
======== ======= ======
(1) Organic revenue growth excludes the impact of foreign exchange,
acquisitions, divestitures, transfers, reimbursable expenses and
unusual items.
Aon Corporation - Segments (Unaudited)
Risk and Insurance Brokerage Services - Continuing Operations
-------------------------------------------------------------
Fourth Quarter Ended Twelve Months Ended
--------------------------- -----------------------------
Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
(millions) 2008 2007 Change 2008 2007 Change
-------- --------- -------- --------- --------- --------
Revenue
-------
Commissions,
fees and
other $1,537 $1,576 (2)% $6,038 $5,752 5%
Investment
income 44 51 (14) 192 205 (6)
-------- --------- -------- --------- --------- --------
Total
revenue 1,581 1,627 (3) 6,230 5,957 5
-------- --------- -------- --------- --------- --------
Expenses
--------
Compensation
and
benefits 934 923 1 3,707 3,457 7
Other general
expenses 426 434 (2) 1,659 1,525 9
-------- --------- -------- --------- --------- --------
Total
operating
expenses 1,360 1,357 - 5,366 4,982 8
-------- --------- -------- --------- --------- --------
Operating
income 221 270 (18) 864 975 (11)
Other
(income)
expense 4 (6) N/A (10) (35) (71)
-------- --------- -------- --------- --------- --------
Income before
provision
for income
tax $217 $276 (21)% $874 $1,010 (13)%
======== ========= ======== ========= ========= ========
Pretax income
margin 13.7% 17.0% 14.0% 17.0%
Consulting -
Continuing
Operations Fourth Quarter Ended Twelve Months Ended
------------ --------------------------- -----------------------------
Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
(millions) 2008 2007 Change 2008 2007 Change
-------- --------- -------- --------- --------- --------
Revenue
-------
Commissions,
fees and
other $341 $372 (8)% $1,353 $1,343 1%
Investment
income 1 1 - 5 9 (44)
-------- --------- -------- --------- --------- --------
Total
revenue 342 373 (8) 1,358 1,352 -
-------- --------- -------- --------- --------- --------
Expenses
--------
Compensation
and benefits 203 219 (7) 815 823 (1)
Other general
expenses 84 94 (11) 331 340 (3)
-------- --------- -------- --------- --------- --------
Total
operating
expenses 287 313 (8) 1,146 1,163 (1)
-------- --------- -------- --------- --------- --------
Operating
income 55 60 (8) 212 189 12
Other
(income)
expense - - - (1) - N/A
-------- --------- -------- --------- --------- --------
Income before
provision
for income
tax $55 $60 (8)% $213 $189 13%
======== ========= ======== ========= ========= =========
Pretax income
margin 16.1% 16.1% 15.7% 14.0%
Reconciliation of segment income before
provision for income tax to income from
continuing operations before provision
for income tax:
Fourth Quarter Ended Twelve Months Ended
--------------------------- -----------------------------
Dec. 31, Dec. 31, Percent Dec. 31, Dec. 31, Percent
(millions) 2008 2007 Change 2008 2007 Change
-------- --------- -------- --------- --------- --------
Segment income
before
provision for
income tax
Risk and
Insurance
Brokerage
Services $217 $276 (21)% $874 $1,010 (13)%
Consulting 55 60 (8) 213 189 13
-------- --------- -------- --------- --------- --------
Total
segment
income
before
provision
for income
tax 272 336 (19) 1,087 1,199 (9)
Unallocated
investment
income 6 11 (45) 68 79 (14)
Unallocated
expenses (75) (40) 88 (166) (130) 28
Interest
expense (30) (36) (17) (126) (138) (9)
-------- --------- -------- --------- --------- --------
Income from
continuing
operations
before
provision
for income
tax $173 $271 (36)% $863 $1,010 (15)%
======== ========= ======== ========= ========= ========
Pretax
income
margin 9.0% 13.5% 11.3% 13.7%
Aon Corporation
Reconciliation of the Impact of Non-GAAP Measures on Segments and Diluted
Earnings Per Share (Unaudited) (1)
Fourth Quarter Ended Twelve Months Ended
December 31, 2008 December 31, 2008
(millions------------------------------- -------------------------------
except Risk and Unallo- Risk and Unallo-
per Insurance cated Insurance cated
share Brokerage Cons- Income & Brokerage Cons- Income &
data) Services ulting Expense Total Services ulting Expense Total
Revenue --------- ------- ------- ------ --------- ------- ------- -----
as
reported $1,581 $342 $1 $1,924 $6,230 $1,358 $43 $7,631
========= ======= ======= ====== ========= ======= ======= =====
Income
(loss)
from
continuing
operations
before
provision
for income
tax - as
reported $217 $55 $(99) $173 $874 $213 $(224) $863
Restruc-
turing
charges
(2005
and
2007
plans) 78 9 - 87 237 17 - 254
Pension
curtailment 6 1 1 8 6 1 1 8
Anti-
bribery
and
compliance
initia-
tives 11 - - 11 42 - - 42
Benfield
costs 2 - 44 46 2 - 50 52
Gain on
sale
of
land - - - - (5) - - (5)
--------- ------- ------- ------ --------- ------- ------- -----
Income
(loss)
from
continuing
operations
before
provision
for income
tax - as
adjusted $314 $65 $(54) 325 $1,156 $231 $(173) 1,214
========= ======= ======= ========= ======= =======
Provision
for income
taxes (2) 93 340
------ -----
Income from
continuing
operations -
as adjusted $232 $874
====== =====
Diluted
earnings
per share
from
continuing
operations -
as
adjusted $0.81 $2.90
====== =====
Weighted
average
common
shares
outstanding -
diluted 288.1 300.9
====== =====
Pretax
income
margins -
as
adjusted 19.9% 19.0% N/A 16.9% 18.6% 17.0% N/A 15.9%
========= ======= ======= ====== ========= ======= ======= =====
Fourth Quarter Ended Twelve Months Ended
December 31, 2007 December 31, 2007
(millions------------------------------- -------------------------------
except Risk and Unallo- Risk and Unallo-
per Insurance cated Insurance cated
share Brokerage Cons- Income & Brokerage Cons- Income &
data) Services ulting Expense Total Services ulting Expense Total
Revenue --------- ------- ------- ------ --------- ------- ------- -----
as
reported $1,627 $373 $6 $2,006 $5,957 $1,352 $50 $7,359
========= ======= ======= ====== ========= ======= ======= =====
Income
(loss)
from
continuing
operations
before
provision
for income
tax - as
reported $276 $60 $(65) $271 $1,010 $189 $(189) $1,010
Restruc-
turing
charges
(2005
and
2007
plans) 30 4 - 34 74 11 - 85
Gain on
sale of
businesses (6) - - (6) (36) - - (36)
Resolution
of U.K.
balance
sheet
reconcil-
iation
difference - - 15 15 - - 15 15
Reinsur-
ance
litiga-
tion - - - - 21 - - 21
--------- ------- ------- ------ --------- ------- ------- -----
Income (loss)
from
continuing
operations
before
provision
for income
tax - as
adjusted $300 $64 $(50) 314 $1,069 $200 $(174) 1,095
========= ======= ======= ========= ======= =======
Provision
for income
taxes (2) 93 348
------ -----
Income from
continuing
operations -
as adjusted $221 $747
====== =====
Diluted
earnings per
share from
continuing
operations -
as adjusted $0.68 $2.33
====== =====
Weighted average
common shares
outstanding -
diluted 324.1 323.0
====== =====
Pretax
income
margins -
as
adjusted 18.4% 17.2% N/A 15.7% 17.9% 14.8% N/A 14.9%
========= ======= ======= ====== ========= ======= ======= =====
(1) Certain noteworthy items impacting revenue and pretax income in 2008
and 2007 are described in this schedule. The revenue, income (loss)
from continuing operations before provision for income tax, diluted
earnings per share from continuing operations and related margins
shown with the caption "as adjusted" are non-GAAP measures.
(2) Tax rate from continuing operations is 28.6% and 29.6% for the fourth
quarters ended December 31, 2008 and 2007, respectively, and 28.0% and
31.8% for the twelve months ended December 31, 2008 and 2007,
respectively.
Aon Corporation
2007 Restructuring Plan (Unaudited)
By Type: Actual Estimated
----------------------------------------- ---------
Nine 4th Full Total
Months Quarter Year Incurred
(millions) 2007 2008 2008 2008 to Date Total
----------------------------------------- ---------
Workforce reduction
(Compensation and
benefits) $17 $118 $48 $166 $183 $330
Lease consolidation
(Other general
expenses) 22 25 13 38 60 134
Asset impairments
(Depreciation and
amortization) 4 13 5 18 22 45
Other costs
associated with
restructuring
(Other general
expenses) 3 9 20 29 32 41
----------------------------------------- ---------
Total restructuring
and related
expenses $46 $165 $86 $251 $297 $550
========================================= =========
By Segment: Actual Estimated
----------------------------------------- ---------
Nine 4th Full Total
Months Quarter Year Incurred
(millions) 2007 2008 2008 2008 to Date Total
----------------------------------------- ---------
Risk and Insurance
Brokerage Services $41 $157 $77 $234 $275 $503
Consulting 5 8 9 17 22 47
----------------------------------------- ---------
Total restructuring
and related
expenses $46 $165 $86 $251 $297 $550
========================================= =========
Benfield Restructuring
Plan (Unaudited)
By Type: Estimated
------------------------
Non-
Purchase
Purchase Account-
(millions) Accounting ing Total
------------------------
Workforce reduction
(Compensation and
benefits) $74 $52 $126
Lease consolidation
(Other general
expenses) 28 21 49
Asset impairments
(Depreciation and
amortization) - 8 8
Other costs
associated with
restructuring
(Other general
expenses) 2 - 2
------------------------
Total restructuring
and related
expenses $104 $81 $185
========================
Aon Corporation
Consolidated Summary of Operations - Reclassified for Discontinued
Operations (Unaudited)
2007 2008
-------------------------------- ---------------------------------
(millions
except
per 1st 2nd 3rd 4th 1st 2nd 3rd 4th
share Quar- Quar- Quar- Quar- Full Quar- Quar- Quar- Quar- Full
data) ter ter ter ter Year ter ter ter ter Year
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Revenue
-------
Comm-
issions,
fees
and
oth-
er $1,702 $1,750 $1,671 $1,943 $7,066 $1,848 $1,889 $1,756 $1,873 $7,366
Invest-
ment
income 67 88 75 63 293 57 67 90 51 265
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total
reve-
nue 1,769 1,838 1,746 2,006 7,359 1,905 1,956 1,846 1,924 7,631
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Expenses
--------
Compen-
sation
and
bene-
fits 1,040 1,097 1,047 1,157 4,341 1,154 1,143 1,131 1,153 4,581
Other
general
expen-
ses 413 413 390 496 1,712 419 503 423 455 1,800
Deprecia-
tion
and
amorti-
zation 47 46 48 52 193 50 58 49 65 222
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total
opera-
ting
expen-
ses 1,500 1,556 1,485 1,705 6,246 1,623 1,704 1,603 1,673 6,603
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Operating
income 269 282 261 301 1,113 282 252 243 251 1,028
Interest
expense 35 34 33 36 138 33 31 32 30 126
Other
(income)
expense - (29) - (6) (35) (4) (2) (3) 48 39
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Income
from
continuing
operations
before
provision
for
income
tax 234 277 228 271 1,010 253 223 214 173 863
Provision
for
income
tax 73 97 95 83 348 76 57 59 50 242
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Income
from
continuing
opera-
tions 161 180 133 188 662 177 166 155 123 621
Discontinued
operations
Income
(loss)
from
discon-
tinued
opera-
tions 79 91 83 77 330 66 1,431 (57) (184) 1,256
Provision
for
(benefit
from)
income
tax 27 31 12 58 128 25 464 (19) (71) 399
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Income
(loss)
from
discont-
inued
opera-
tions 52 60 71 19 202 41 967 (38) (113) 857
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Net
income $213 $240 $204 $207 $864 $218 $1,133 $117 $10 $1,478
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Basic
net
income
(loss)
per
share:
Continu-
ing
operat-
ions $0.54 $0.61 $0.45 $0.62 $2.23 $0.58 $0.57 $0.57 $0.45 $2.18
Discont-
inued
operat
ions 0.17 0.20 0.24 0.07 0.67 0.14 3.34 (0.14) (0.41) 3.00
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Net
in-
come $0.71 $0.81 $0.69 $0.69 $2.90 $0.72 $3.91 $0.43 $0.04 $5.18
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Dilutive
net
income
(loss)
per
share:
Contin-
uing
operat-
ions $0.50 $0.57 $0.42 $0.58 $2.07 $0.55 $0.54 $0.53 $0.43 $2.06
Discont-
inued
opera-
tions 0.16 0.18 0.22 0.06 0.62 0.13 3.17 (0.13) (0.40) 2.85
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Net
in-
come $0.66 $0.75 $0.64 $0.64 $2.69 $0.68 $3.71 $0.40 $0.03 $4.91
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Weighted
average
common
shares
out-
standing -
di-
luted 324.4 321.9 321.5 324.1 323.0 319.8 305.3 290.3 288.1 300.9
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Aon Corporation
Segments - Reclassification for Discontinued Operations (Unaudited)
2007 2008
---------------------------------- ---------------------------
1st 2nd 3rd 4th 1st 2nd 3rd
Quar- Quar- Quar- Quar- Full Quar- Quar- Quar- Nine
(millions) ter ter ter ter Year ter ter ter Months
------ ------ ------ ------ ------ ------ ------ ------ ------
Revenue
-------
Risk and
insurance
brokerage
services $1,429 $1,490 $1,411 $1,627 $5,957 $1,566 $1,610 $1,473 $4,649
Consulting 329 325 325 373 1,352 343 336 337 1,016
Unallocated
As reported 23 32 21 13 89 7 18 41 66
Less:
reclass-
ification
à
discont-
inued
opera-
tions (2) (3) (3) (2) (10) (2) (1) (1) (4)
------ ------ ------ ------ ------ ------ ------ ------ ------
As
reclass-
ified 21 29 18 11 79 5 17 40 62
Inter-
segment (10) (6) (8) (5) (29) (9) (7) (4) (20)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total $1,769 $1,838 $1,746 $2,006 $7,359 $1,905 $1,956 $1,846 $5,707
====== ====== ====== ====== ====== ====== ====== ====== ======
Income
(loss)
before
income
tax
-------
Risk
and
insurance
brokerage
services $234 $272 $228 $276 $1,010 $238 $231 $188 $657
Consulting 47 44 38 60 189 63 43 52 158
Unallocated
As reported (48) (41) (43) (68) (200) (50) (52) (28) (130)
Less:
reclass-
ification
à
dis-
continued
opera-
tions 1 2 5 3 11 2 1 2 5
------ ------ ------ ------ ------ ------ ------ ------ ------
As
reclass-
ified (47) (39) (38) (65) (189) (48) (51) (26) (125)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total $234 $277 $228 $271 $1,010 $253 $223 $214 $690
====== ====== ====== ====== ====== ====== ====== ====== ======
Income
from
continuing
operations
before
income
tax -
margins
--------
Risk and
insurance
brokerage
services 16.4% 18.3% 16.2% 17.0% 17.0% 15.2% 14.3% 12.8% 14.1%
Consulting 14.3% 13.5% 11.7% 16.1% 14.0% 18.4% 12.8% 15.4% 15.6%
Total
As
reported 13.2% 14.9% 12.8% 13.3% 13.6% 13.2% 11.3% 11.5% 12.0%
As
reclass-
ified 13.2% 15.1% 13.1% 13.5% 13.7% 13.3% 11.4% 11.6% 12.1%
Aon Corporation
Property and Casualty Run-off Insurance Operations (Unaudited)
2007
----------------------------------------
1st 2nd 3rd 4th Full
(millions except per share data) Quarter Quarter Quarter Quarter Year
------- ------- ------- -------- -------
Revenue
-------
Commissions, fees and other $- $1 $1 $1 $3
Investment income 2 2 2 1 7
------- ------- ------- -------- -------
Total revenue 2 3 3 2 10
------- ------- ------- -------- -------
Expenses
--------
Compensation and benefits 2 1 1 2 6
Other general expenses 1 4 7 3 15
------- ------- ------- -------- -------
Total operating expenses 3 5 8 5 21
------- ------- ------- -------- -------
Operating loss (1) (2) (5) (3) (11)
Other expense - - - - -
------- ------- ------- -------- -------
Loss before benefit from income
tax (1) (2) (5) (3) (11)
Benefit from income tax - (1) (2) (1) (4)
------- ------- ------- -------- -------
Net loss $(1) $(1) $(3) $(2) $(7)
======= ======= ======= ======== =======
Basic net loss per share $(0.01) $(0.01) $(0.01) $(0.01) $(0.02)
======= ======= ======= ======== =======
Dilutive net loss per share $- $- $(0.01) $- $(0.02)
======= ======= ======= ======== =======
Weighted average common shares
outstanding - diluted 324.4 321.9 321.5 324.1 323.0
======= ======= ======= ======== =======
2008
---------------------------------------
1st 2nd 3rd 4th Full
(millions except per share data) Quarter Quarter Quarter Quarter Year
-------- ------- ------- -------- -----
Revenue
Commissions, fees and other $- $- $- $1 $1
Investment income 2 1 1 1 5
-------- ------- ------- -------- -----
Total revenue 2 1 1 2 6
-------- ------- ------- -------- -----
Expenses
Compensation and benefits 1 2 1 - 4
Other general expenses 3 - 2 (3) 2
-------- ------- ------- -------- -----
Total operating expenses 4 2 3 (3) 6
-------- ------- ------- -------- -----
Operating income (loss) (2) (1) (2) 5 -
Other expense - - - 191 191
-------- ------- ------- -------- -----
Loss before benefit from income
tax (2) (1) (2) (186) (191)
Benefit from income tax (1) - - (73) (74)
-------- ------- ------- -------- -----
Net loss $(1) $(1) $(2) $(113) $(117)
======== ======= ======= ======== =====
Basic net loss per share $(0.01) $- $(0.01) $(0.41) $(0.41)
======== ======= ======= ======== =====
Dilutive net loss per share $- $- $(0.01) $(0.39) $(0.39)
======== ======= ======= ======== =====
Weighted average common shares
outstanding - diluted 319.8 305.3 290.3 288.1 300.9
======== ======= ======= ======== =====
Aon Corporation
Condensed Consolidated Statements of Financial Position
As of
----------------------------------
(millions) Dec. 31, 2008 Dec. 31, 2007 (2)
---------- -------------- ------------------
(Unaudited)
ASSETS
------
CURRENT ASSETS
Cash $657 $584
Short-term investments 579 1,120
Receivables 1,992 1,993
Fiduciary assets (1) 10,678 9,498
Other current assets 480 276
Assets held for sale 237 4,601
-------------- ------------------
Total Current Assets 14,623 18,072
Goodwill 5,637 4,915
Other intangible assets 779 204
Fixed assets, net 451 497
Long-term investments 342 332
Other non-current assets 1,340 914
-------------- ------------------
TOTAL ASSETS $23,172 $24,934
============== ==================
LIABILITIES AND STOCKHOLDERS'
EQUITY
------------------------------
CURRENT LIABILITIES
Fiduciary liabilities $10,678 $9,498
Short-term debt 105 252
Accounts payable and accrued
liabilities 1,536 1,413
Other current liabilities 438 293
Liabilities held for sale 142 3,172
-------------- ------------------
Total Current Liabilities 12,899 14,628
Long-term debt 1,872 1,893
Pension, post employment and post
retirement liabilities 1,694 1,251
Other non-current liabilities 1,393 941
-------------- ------------------
TOTAL LIABILITIES 17,858 18,713
TOTAL STOCKHOLDERS' EQUITY 5,314 6,221
-------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $23,172 $24,934
============== ==================
(1) Includes short-term investments: 2008 - $3,204; 2007 - $3,122.
(2) Certain amounts have been reclassified to conform to the 2008
presentation.
SOURCE Aon Corporation
CONTACT: Investor, Scott Malchow, Vice President, Investor Relations, +1-312-381-3983, or Media, David Prosperi, Vice President, Global Public Relations, +1-312-381-2485, both of Aon Corporation
Copyright © 2009 PR Newswire - Increased total annual savings related to the 2007 restructuring program by $70 million to $370 million, and costs necessary to achieve savings by $100 million to $550 million - Increased total annual savings related to the 2007 restructuring program by $70 million to $370 million, and ...
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