- Aon Corporation (NYSE: AOC) today
reported fourth quarter and twelve months 2004 results.
Net income per share for the fourth quarter was US$0.56 compared
to US$0.65 in 2003. Net income from continuing operations was US$192
million or US$0.57 per share compared to US$216 million or US$0.65
per share a year ago.
For the twelve months, net income per share for 2004 and 2003 was
US$1.95 and US$1.90, respectively. Net income from continuing
operations increased to US$685 million from US$676 million for the
twelve months and the related per share amount for both periods was
US$2.04. An analysis of certain items that influenced current and
prior period results is provided below.
During the quarter, the company completed the sale of its
Cambridge Integrated Services claims business and the sale of
virtually all of its common stock ownership in Endurance Specialty
Holdings Ltd. In addition, the company recorded a US$50 million
provision for potential settlements that could result from
investigations by New York and other states. Of this amount, US$43
million was allocated to the Risk and Insurance Brokerage Services
segment and the balance to the Consulting segment.
Patrick G. Ryan, Aon's Chairman and CEO, stated, "It remains a
difficult environment in which to achieve meaningful revenue growth
given industry pricing trends and our decision to terminate
contingent commission agreements. Nevertheless, we are doing
everything possible to capitalize on the opportunities which exist in
this period of industry transition. In addition, we are doing a much
better job of controlling operating expenses and investment
Fourth Quarter and Twelve Months Segment Review
This press release contains references to organic revenue growth,
a measure that management believes is important to evaluate changes
in revenue from existing operations. Please see additional
information below regarding this measure. Prior period segment
results were reclassified in conjunction with certain non-core
businesses being placed into discontinued operations.
Risk and Insurance Brokerage Services reported revenue was US$1.5
billion for both the current and prior year quarters, with organic
revenue declining 1%. Contingent commission revenue was US$11 million
in fourth quarter 2004 compared to US$46 million in fourth quarter
2003, reflecting the termination of these arrangements. Excluding
contingent commission revenue, organic revenue growth in the current
quarter was 2%.
In the fourth quarter, expenses were up 6%, essentially reflecting
the impact of foreign exchange and the previously mentioned
settlement provision. Pretax income for the quarter was US$173
million compared to US$239 million in 2003 and the pretax margin was
11.5% versus 16.1% a year ago.
For the full year, pretax income declined 9% to US$773 million,
and the pretax margin declined 170 basis points to 13.5%.
Consulting revenue rose 4% to US$341 million during the quarter,
with no organic revenue growth. Benefits, compensation, management
and communications consulting achieved 2% organic revenue growth
primarily from international operations, while outsourcing revenues
declined 4% on an organic basis. Contingent commission revenue was
US$4 million in fourth quarter 2004 compared to US$6 million in
fourth quarter 2003, again reflecting the termination of these
arrangements. Excluding contingent commission revenue, organic
revenue growth in the current quarter was 1%.
Pretax income increased 2% in the quarter to US$48 million, and
the pretax margin was 14.1% versus 14.3% in 2003. Improved results in
outsourcing and international consulting and effective expense
management partially offset the margin decline attributable to the
Twelve months pretax income rose 19% to US$131 million, and the
pretax margin increased 120 basis points to 10.5%.
Insurance Underwriting revenue increased 6% to US$785 million,
with segment organic revenue declining 1% during the quarter.
Reported revenue in the quarter included a US$23 million increase due
to reinsurance program changes for a specialty accident and health
line. These changes had no impact on organic revenue growth or pretax
Pretax income rose to US$61 million from US$11 million in the
quarter. Pretax margins were 7.8% for 2004 and 1.5% for 2003. Fourth
quarter 2003 results in the select property and casualty portfolio
included a US$45 million pretax loss from the run-off of National
Program Services (NPS) business with no comparable amount in 2004.
Twelve months pretax income was US$254 million compared with
US$196 million in 2003, and the pretax margin was 8.1% versus 6.8% a
year ago. Full year 2003 results included a US$66 million pretax loss
from the run-off of NPS business.
Corporate and Other segment revenue was US$61 million in the
quarter compared to US$40 million in 2003. Fourth quarter 2004
results included a US$37 million pretax gain on the sale of Endurance
common stock compared to Endurance equity earnings of US$18 million
in 2003. Fourth quarter 2004 results also included a pretax gain of
US$9 million related to the quarterly revaluation of Endurance
warrants compared to a US$16 million gain in the prior year.
The pretax loss in the quarter was US$2 million compared with
pretax income of US$61 million a year ago. Fourth quarter 2003
results included a US$60 million pretax World Trade Center (WTC)
unusual credit. Interest expense in the quarter was higher
principally due to the reclassification of the trust-preferred
after-tax minority interest (as of first quarter 2004 under the
adoption of FIN 46). Prior periods were not restated.
The pretax loss for twelve months was US$108 million compared to a
loss of US$23 million in 2003, reflecting the performance of the
company's investment in Endurance common stock and warrants, the gain
on sale of Endurance stock as well as the full year effect of the
trust preferred reclassification discussed above.
The fourth quarter after-tax loss from discontinued operations was
US$3 million (US$0.01 per share) in 2004 and US$1 million in 2003
which in each case is attributable to businesses discontinued in
prior periods. Revenues pertaining to total discontinued operations
were US$1 million and US$27 million in each of the comparable
Effective Tax Rate
The effective tax rate on continuing operations for the full year
2004 was 34.8% compared to 36% reported in prior quarters. The lower
rate is principally attributable to the difference between our tax
basis and book basis in Cambridge.
The table below shows certain pretax items that influenced fourth
quarter and full year results.
After netting the effect of currency hedges, the positive impact
of foreign exchange was approximately US$0.04 per share for fourth
quarter 2004 and US$0.05 per share in fourth quarter 2003.
Total debt and preferred stock decreased US$31 million to US$2.2
billion at December 31, 2004 from December 31, 2003. Total debt and
preferred stock as a percentage of total capital was reduced to 30%
from 33% over the same period. Stockholders' equity increased to
US$5.2 billion. Compared to September 30, 2004, total debt and
preferred stock increased US$153 million.
In February 2005, Aon renewed its three-year U.S. commercial paper
back-up facility in the amount of US$600 million as well as its
EUR650 million credit facility. The three year and five year portions
of the Euro facility were for EUR325 million each.
Approximately 94% of Aon's investment portfolio at quarter end was
in short-term and fixed maturities. More than 96% of the fixed income
securities were rated investment grade.
In October 2004, the Financial Accounting Standards Board (FASB)
ratified EITF No. 04-8, The Effect of Contingently Convertible
Instruments on Diluted Earnings Per Share. EITF 04-8 requires that
contingent convertible instruments be included in diluted earnings
per share computations (if dilutive) regardless of whether the market
price trigger has been met.
Aon's 3.5% convertible debt securities, which were issued in
November 2002 and are due November 2012, are contingently
convertible. Aon included the effect of the 3.5% convertible debt
securities in its diluted per share calculation in the second and
third quarters of 2004, as the closing price of Aon's common stock
had exceeded the threshold for the requisite time period during the
previous quarter. As required, Aon has adjusted for comparative
purposes its diluted earnings per share for each quarter and
year-to-date period in 2003, as well as for the first quarter, and
the six and nine months of 2004. Diluted earnings per share as
initially reported and as adjusted for the effect of EITF 04-8 are as
2003 As Reported As Adjusted
---- ----------- -----------
First quarter US$0.48 US$0.46
Second quarter 0.46 0.45
Six months 0.94 0.91
Third quarter 0.36 0.35
Nine months 1.30 1.26
Fourth quarter 0.67 0.65
Twelve months 1.97 1.90
First quarter 0.53 0.51
Second quarter 0.52 0.52
Six months 1.04 1.03
Third quarter 0.36 0.36
Nine months 1.40 1.39
The Company will host an audio webcast on Wednesday, February 9 at
10:00 a.m. central time that can be accessed at http://www.aon.com
Aon Corporation ( http://www.aon.com
) is a leading provider of
risk management services, insurance and reinsurance brokerage, human
capital and management consulting, and specialty insurance
underwriting. The company employs approximately 48,000 professionals
in its 500 offices in more than 120 countries. Backed by broad
resources, industry knowledge and technical expertise, Aon
professionals help a wide range of clients develop effective risk
management and workforce productivity solutions.
This press release contains certain statements relating to future
results, which are forward-looking statements as that term is defined
in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from either historical or anticipated results, depending on a variety
of factors. Potential factors that could impact results include the
general economic conditions in different countries around the world,
fluctuations in global equity and fixed income markets, exchange
rates, rating agency actions, resolution of pending regulatory
investigations and related issues, including those related to
compensation arrangements with underwriters, pension funding,
ultimate paid claims may be different from actuarial estimates and
actuarial estimates may change over time, changes in commercial
property and casualty markets and commercial premium rates, the
competitive environment, the actual costs of resolution of contingent
liabilities and other loss contingencies, and the heightened level of
potential errors and omissions liability arising from placements of
complex policies and sophisticated reinsurance arrangements in an
insurance market in which insurer reserves are under pressure.
Further information concerning the Company and its business,
including factors that potentially could materially affect the
Company's financial results, is contained in the Company's filings
with the Securities and Exchange Commission.
This press release includes supplemental information related to
organic revenue growth, a measure that management believes is
important to evaluate changes in revenue from existing operations. We
also believe that this supplemental information is helpful to
investors. Organic revenue growth excludes from reported revenues the
impact of foreign exchange, acquisitions, divestitures, transfers
between business units, investment income, reimbursable expenses,
unusual items, and for the underwriting segment only, an adjustment
between written and earned premium. A reconciliation is provided in
the attached schedules. The supplemental organic revenue growth
information does not affect net income or any other GAAP reported
amounts. It should be viewed in addition to, not in lieu of, the
Company's Consolidated Summary of Operations. Industry peers provide
similar supplemental information regarding their revenue performance,
although they do not make identical adjustments.
Web site: http://www.aon.com
ots Originaltext: Aon Corporation
Im Internet recherchierbar: http://www.newsaktuell.ch
Investors, Craig Streem, Corporate Vice President, Investor
Relations, +1-312-381-3983, or Media, Al Orendorff, Director of
Public Relations, +1-312-381-3153, both of Aon Corporation