Aon Corp. reported third quarter 2002 earnings increased to $0.46 per share from $0.26 per share in third quarter 2001. Operating segment reported revenues for third quarter were up 17 percent year-over-year reflecting reported strong demand for Aon’s services and products.
Patrick Ryan, chairman and CEO of Aon Corporation, noted, “Third quarter earnings showed excellent progress in Aon’s brokerage segment with organic revenue growth of 18 percent, well above 10 percent in the second quarter. Large new outsourcing contracts drove consulting segment organic revenue growth to 15 percent, while also pressuring margins as new investments were made to support this business.
“The underwriting segment had revenue growth of 14 percent. Buildup costs to support original growth plans for specialty property and casualty underwriting, however, exceeded new revenues and factored into the margin decline. Overall, we are encouraged by the progress we are making – especially our strong new business achievements across many of our businesses.”
Aon has decided to enhance its capital position in anticipation of debt maturities in 2003 and a reduction of stockholders’ equity due to pension obligations. In addition, the Company has concluded that short-term debt levels are too high.
“Maintaining strong credit and claims paying ratings is important to our business,” Ryan continued. “Therefore, we believe it is prudent that we implement capital enhancement plans, including raising equity/equity-linked capital, refinancing debt and reducing the dividend, in order to reinforce Aon’s financial strength.”
Approximately $1 billion of capital is expected to be raised of which $500 million to $600 million would be equity/equity-linked securities used to pay down debt and $400 million to $500 million would be debt to replace the same amount of existing debt in order to extend maturities.
Aon has decided not to sell, or spin-off, its major underwriting subsidiaries due to adverse market conditions for mergers and acquisitions. Separately, Aon expects that pension costs will negatively impact future financial results, similar to other large corporations.