10-KPeriod: FY2008

Aon plc Annual Report, Year Ended Dec 31, 2008

Filed March 2, 2009For Securities:AON

Summary

Aon plc's 2008 Form 10-K reveals a year marked by strategic acquisitions and divestitures amidst a challenging economic environment. The company completed its significant merger with Benfield Group Limited, a leading reinsurance intermediary, aiming to enhance its global reinsurance capabilities under the new Aon Benfield brand. Concurrently, Aon continued its strategy of streamlining its business portfolio by divesting non-core operations, including its property and casualty insurance underwriting segments. Financially, while the global credit market disruptions impacted the insurance industry, Aon demonstrated resilience with positive organic growth in its core brokerage and consulting segments. The company also focused on capital management through substantial share repurchases, funded partly by proceeds from divestitures. Despite increased restructuring charges related to integration and streamlining initiatives, Aon maintained its commitment to shareholder returns through dividends. Key financial metrics show a slight decrease in income from continuing operations primarily due to higher restructuring costs, although net income saw a significant increase due to substantial gains from divested insurance operations. Diluted EPS from continuing operations remained stable year-over-year. The company's balance sheet saw an increase in goodwill and intangible assets due to the Benfield acquisition, offset by a decrease in cash and working capital reflecting strategic deployment of funds. Aon emphasized its ongoing efforts in cost management and operational efficiency to navigate the uncertain economic landscape and deliver value to its shareholders.

Financial Highlights

50 data points
Beta

Revenue

$7.53B

Net Income

$1.46B

19.4% Net Margin

EPS (Diluted)

$4.80

Total Assets

$22.94B

Cash & Equivalents

$582.00M

Free Cash Flow

$865.00M

Financial Statements
Beta
Revenue$7.53B
Operating Expenses$6.59B
Operating Income$940.00M
Interest Expense$126.00M
Net Income$1.46B
EPS (Basic)$4.99
EPS (Diluted)$4.80
Shares Outstanding (Basic)292.80M
Shares Outstanding (Diluted)304.50M

Key Highlights

  • 1Completed the acquisition of Benfield Group Limited, a significant move to strengthen its global reinsurance operations.
  • 2Divested non-core insurance underwriting businesses (CICA and Sterling), resulting in a substantial pretax gain of approximately $1.4 billion.
  • 3Achieved 2% organic revenue growth in Risk and Insurance Brokerage Services and 3% in Consulting, demonstrating resilience in a challenging economic climate.
  • 4Repurchased approximately 42.6 million shares of common stock for $1.9 billion during 2008, utilizing proceeds from divestitures.
  • 5Incurred $251 million in restructuring charges for the 2007 global restructuring plan and commenced a new plan related to the Benfield merger, targeting significant cost savings.
  • 6Net income rose significantly to $1.46 billion, primarily driven by gains from discontinued operations.
  • 7Income from continuing operations slightly decreased to $621 million ($2.06 diluted EPS), impacted by increased restructuring costs.

Frequently Asked Questions

Aon's primary strategic actions in 2008 included the significant acquisition of Benfield Group Limited, a leading independent reinsurance intermediary, and the divestiture of its Combined Insurance Company of America (CICA) and Sterling Insurance Company subsidiaries. These moves were part of a strategy to focus on core businesses and streamline operations.

While the global credit market disruptions created difficult conditions for the insurance industry, Aon demonstrated resilience. The company reported organic growth in its core Risk and Insurance Brokerage Services and Consulting segments. However, operating expenses increased due to higher restructuring costs, unfavorable foreign exchange, and increased compensation costs, which, along with other factors, led to a decrease in income from continuing operations before income taxes.

The acquisition of Benfield in November 2008 significantly increased Aon's goodwill and other intangible assets on the balance sheet. It also led to new restructuring plans aimed at integrating Benfield's operations, with associated costs totaling approximately $185 million over three years. The pro forma financial statements suggest the acquisition would have increased revenue and net income if it had occurred at the beginning of the year.

Aon actively managed its capital by repurchasing approximately 42.6 million shares of its common stock for $1.9 billion. These repurchases were funded partly by the proceeds from the divestiture of its insurance underwriting businesses. The company also continued to pay dividends to its shareholders, maintaining a consistent quarterly dividend of $0.15 per share.