Aon Reports 4th Quarter and Full Year 2007 Results

February 8, 2008

Chicago-based Aon Corp. (NYSE:AOC) reported on Thursday, February 7th, results for the fourth quarter and full year ending Dec. 31, 2007.

Net income decreased 7percent to $207 million or $0.64 per share, compared to $223 million or $0.67 per share for the prior year quarter. Net income from continuing operations increased 33 percent to $190 million or $0.59 per share, compared to $143 million or $0.43 per share for the prior year quarter. Net income from continuing operations per share, excluding certain items, increased 17percent to $0.69 compared to $0.59 for the prior year quarter.

“We are pleased with our solid fourth quarter results, which reflect the strength of our industry-leading network of global resources and capabilities and continued progress in each of our key operating metrics. Organic revenue growth was two percent in our brokerage segment and three percent in consulting services, adjusted pretax margin increased 110 basis points, and adjusted earnings per share from continuing operations increased 17 percent,” said Greg Case, president and chief executive officer, Aon Corp.

Case added that the fourth quarter and 2007 results are fully on schedule with the second year of our three-year improvement plan. Expense initiatives and restructuring programs are delivering meaningful margin improvement while funding investments in value-added services and capabilities for our clients. We increased our focus on core assets with the announced sale of our lower-margin, more capital-intensive insurance underwriting businesses.

“Our balance sheet is strong, which provides financial flexibility, and we increased our authorized share repurchase program by $2.6 billion. All these actions support our belief in the underlying strength of Aon and our ongoing commitment to long-term shareholder value creation,” Case said.

Total revenue increased 8 percent to $2.0 billion with organic revenue growth of 1 percent. Total expenses increased 4 percent or $73 million to $1.8 billion, including a $92 million unfavorable impact from foreign currency translation.

Pension expense related to the Company’s major defined benefit pension plans declined to $15 million in the fourth quarter compared to $54 million in the prior year quarter. Pension expense declined to $80 million in 2007 compared to $233 million in 2006 due primarily to plan amendments made in the Company’s major defined benefit pension plans. The Company currently anticipates that 2008 pension expense will be similar to 2007.

Restructuring expense was $34 million in the fourth quarter compared to $78 million in the prior year quarter.

Restructuring savings realized in the fourth quarter are estimated at $64 million compared to $37 million in the prior year quarter. Of the estimated restructuring savings in the fourth quarter, $54 million were related to the Brokerage segment, primarily for workforce reduction. The 2005 restructuring program resulted in cumulative cost savings of approximately $225 million in 2007 and is on track to achieve $270 million of cumulative cost savings in 2008. Cumulative cost savings estimates do not include any benefits related to businesses placed into discontinued operations.

The 2007 restructuring program, before any potential reinvestment of savings, is expected to result in cumulative cost savings of approximately $50-70 million in 2008, $175-200 million in 2009 and $240 million in 2010, consistent with previous estimates.

Foreign currency translation increased net income by $0.04 per share compared to the prior year quarter.

Effective tax rate on continuing operations was 30.4 percent for the fourth quarter compared to 26.7 percent for the prior year quarter. Both quarters were impacted by the resolution of certain items, non-recurring tax adjustments and tax credits. The Company currently anticipates that the effective tax rate on continuing operations will be 33.0 percent for 2008.

Diluted average shares outstanding declined to 324 million in the fourth quarter compared to 334 million in the prior year quarter, due primarily to the Company’s share repurchase program. During the fourth quarter, the Company repurchased 544,700 shares of common stock for $26 million, at an average price of $47.29 per share.

Source: Aon Corp

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