Chicago (ots/PRNewswire) - Aon Corporation (NYSE: AOC) today
reported first quarter 2005 net income of US$200 million or US$0.59
per share, increasing 18% and 16%, respectively, from the first
quarter of 2004. Income from continuing operations was US$200
million or US$0.59 per share compared to US$192 million or US$0.58
per share a year ago.
Gregory C. Case, Aon's President and CEO, stated, "I am encouraged
that Aon achieved improved results in the first quarter despite a
difficult revenue environment in the insurance brokerage and human
resources consulting industries and despite our decision to eliminate
contingent commissions last year. During the quarter, we continued
our efforts to keep costs under control and to develop new sources of
revenue. We are committed to increasing profitability by developing
growth opportunities and effectively managing expenses."
First Quarter Segment Review
Risk and Insurance Brokerage Services first quarter revenue
declined 4% to US$1.4 billion, with organic revenue declining 5%.
Excluding contingent commissions, organic revenue in the current
quarter declined 3%. Contingent commission revenue was US$12 million
in the first quarter of 2005, reflecting amounts related to
arrangements terminated as of October 1, 2004. Contingent commission
revenue was US$35 million in the first quarter of 2004. Investment
income increased US$13 million in the quarter.
Organic revenue in Brokerage-Americas declined 9%, primarily
driven by the elimination of contingent commissions and the impact of
declining property and casualty pricing. Excluding the impact of
contingent commissions, Brokerage-Americas organic revenue declined
5%. Brokerage-International reported a 1% decline in organic revenue,
and Reinsurance organic revenue declined 4%.
First quarter 2005 pretax income and margin comparisons were
favorably influenced by a 5% reduction in expenses largely reflecting
the exit of the claims services business, changes to incentive
compensation programs, and continued emphasis on cost control, in
particular, reductions in staff. Pretax income was US$243 million,
unchanged from the prior year, and the pretax margin improved to
17.4% from 16.6% a year ago.
Consulting revenue rose 3% to US$309 million during the quarter.
Organic revenue declined 1%, reflecting the loss of contingent
commissions and a decline in outsourcing revenue. Excluding
contingent commissions, organic revenue growth was nil in the current
quarter. Contingent commission revenue was negligible in the first
quarter of 2005 compared to US$4 million in the first quarter of
2004. Organic revenue growth in consulting services was 2%, while
outsourcing revenues declined 11%, primarily reflecting the loss of a
Pretax income was US$26 million, unchanged from the prior year,
and the pretax margin was 8.4% versus 8.6% in 2004.
Insurance Underwriting revenue increased 1% to US$789 million,
with segment organic revenue declining 3% during the quarter.
Reported revenue in the quarter included a US$12 million increase due
to reinsurance program changes for a specialty accident and health
(A&H) line. These changes had no impact on organic revenue growth or
pretax income. In addition, strong growth in the sales of a
supplemental health product was partially offset by planned
reductions in certain programs and the run-off of non-core
businesses. The decline in warranty, credit and property and casualty
revenue principally reflected the loss of an account within the
European credit line of business that had minimal impact on pretax
Pretax income rose 28% to US$68 million from US$53 million last
year. The pretax margin improved to 8.6% from 6.8% for 2004,
reflecting improved profitability in both underwriting subsegments
and higher investment income.
Corporate and Other segment revenue was US$29 million compared to
US$36 million in 2004. First quarter 2005 results included a pretax
gain of US$16 million related to the quarterly revaluation of
Endurance warrants compared to a US$4 million gain in the prior year.
First quarter 2004 results included an US$11 million pretax gain on
the sale of Endurance common stock and Endurance equity earnings of
The pretax loss in the quarter was US$24 million compared with a
loss of US$22 million a year ago.
Foreign Exchange Impact
First quarter 2005 earnings per share were positively affected by
US$0.02 related to foreign currency translation gains. In addition,
first quarter 2005 and 2004 earnings per share included US$0.02 and
US$0.03, respectively, of currency hedging gains.
Total debt and preferred stock increased US$76 million to US$2.1
billion at March 31, 2005 from March 31, 2004. Total debt and
preferred stock as a percentage of total capital was reduced to 29%
from 31% over the same period. Stockholders' equity was US$5.1
billion, unchanged from year-end 2004. Compared to December 31, 2004,
total debt and preferred stock decreased US$30 million.
Approximately 94% of Aon's investment portfolio at quarter end was
in short-term and fixed maturities, with 97% of the fixed income
securities rated investment grade.
The Company will host an audio webcast on Wednesday, May 4 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. There are 47,000 employees working in Aon's 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
This press release contains certain statements related 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
a variety of factors. Potential factors that could impact results
include: general economic conditions in different countries in which
we do business around the world, changes in global equity and fixed
income markets that could affect the 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 various pension plans,
changes in the competitive environment, changes in commercial
property and casualty markets and commercial premium rates that could
impact revenues, changes in revenues and earnings due to the
elimination of contingent commissions, other uncertainties
surrounding a new compensation model, the impact of regulatory
investigations brought by state attorneys general and state insurance
regulators related to our compensation arrangements with underwriters
and related issues, the impact of class actions and individual
lawsuits including client class actions, securities class actions,
derivative actions, and ERISA class actions, the cost of resolution
of other contingent liabilities and loss contingencies, and the
difference in ultimate paid claims in our underwriting companies from
actuarial estimates. 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.
@@start.t1@@ Investor Contact: Craig Streem
Corporate Vice President, Investor Relations
Media Contact: Al Orendorff
Director, Public Relations
Web site: http://www.aon.com
ots Originaltext: Aon Corporation
Im Internet recherchierbar: http://www.presseportal.ch
Investor Contact: Craig Streem, Corporate Vice President, Investor
Relations +1-312-381-3983, Media Contact: Al Orendorff, Director,
Public Relations +1-312-381-3153