Aon’s Q3 Net up Slightly at $120 Million; Other Results Mixed

October 30, 2009

Aon Corp. reported results for the third quarter ended September 30, 2009, which show net income attributable to Aon stockholders was up slightly at $120 million or $0.41 per share, compared to $117 million or $0.40 per share for the prior year quarter.

However, Aon also noted that net income attributable to shareholders “from continuing operations decreased 25 percent to $117 million or $0.40 per share, compared to $155 million or $0.53 per share for the prior year quarter.

Aon also reported the following figures for the period:
— Total revenue was $1.8 billion and EPS [earnings per share] from continuing operations was $0.40
— EPS from continuing operations, excluding certain items, decreased 6 percent to $0.65
— Brokerage revenue was $1.5 billion with a decline in organic revenue of 3 percent
— Brokerage pretax margin was 12.6 percent and the adjusted pretax margin, excluding certain items, increased 140 basis points to 18.4 percent
— Consulting revenue was $308 million with a decline in organic revenue of 5 percent
— Consulting pretax margin was 10.7 percent and the adjusted pretax margin, excluding certain items, decreased 10 basis points to 15.6 percent
— Repurchased 3.0 million shares of common stock for $125 million
— Increased estimated annualized savings related to the 2007 restructuring program by $97 million to $467 million, and costs necessary to achieve savings by $150 million to $700 million
— Accelerated estimated savings targets for 2009 and 2010 under the Aon Benfield restructuring program, while decreasing total costs necessary to achieve savings by $30 million to $155 million

President and CEO Greg Case commented: “Our third quarter results reflect solid operational discipline, as highlighted by a 140 basis point adjusted pretax margin improvement in our Brokerage segment, despite difficult economic and industry conditions and a 69 percent decline in total investment income.

“We continue to make substantial investments across our businesses with the rollout of our Global Risk Insight Platform [GRIP] and the introduction of Inpoint, our insurance carrier consulting business, as well as the addition of key talent in Consulting.

“As we invest in future growth opportunities, our 2007 and Aon Benfield restructuring programs will continue to deliver additional cost savings as we have achieved less than 40 percent thus far, of the total $589 million of estimated annual savings under these two programs.

“Lastly, our balance sheet and strong cash flow provide significant financial flexibility to create shareholder value, as highlighted by the repurchase of an additional $125 million of stock during the quarter.”

In addition Aon’s bulletin explained that the “restructuring expenses related to the 2007 and Aon Benfield restructuring programs were $99 million in the third quarter compared to $54 million in the prior year quarter.” This was balanced by restructuring savings in the third quarter. Those related to the 2007 restructuring program “are estimated at $68 million compared to $29 million in the prior year quarter;” Aon Benfield savings were estimated at $14 million.

Aon also said: “Of the estimated restructuring savings in the third quarter, $57 million were related to the Brokerage segment primarily for workforce reduction. Before any potential reinvestment of savings, the 2007 restructuring program is now expected to deliver cumulative cost savings of approximately $240-245 million in 2009 and $467 million of annualized run-rate cost savings by the end of 2010, primarily as a result of additional cost savings opportunities to streamline support functions globally.”

Aon’s said its Risk and Insurance Brokerage Services total revenue increased by “one percent in the third quarter to $1.5 billion compared to the prior year quarter due to an 11 percent increase from acquisitions, primarily Benfield, net of dispositions, partially offset by a 5 percent unfavorable impact from foreign currency translation on commissions and fees and a 63 percent decline in investment income.

“Americas organic revenue decreased 1 percent due primarily to weak economic conditions and a soft market in both U.S. Retail and Canada, partially offset by strong growth in Latin America.

“U.K. organic revenue decreased 4 percent due primarily to weak economic conditions and lower new business. EMEA organic revenue decreased 5 percent as weak economic conditions in continental Europe offset growth in certain emerging markets.

“Asia Pacific organic revenue decreased 1 percent reflecting the impact of exiting certain businesses in Japan, partially offset by modest growth in New Zealand and certain emerging markets.

“Reinsurance organic revenue decreased 4 percent du e primarily to higher cedent retentions in treaty business, partially offset by new business growth globally in treaty placements.”

The full report may be obtained on Aon’s web site at: http://www.aon.com

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