What is the financial performance trend for Aon in the first half of 2002 compared to 2001?

Aon showed significant improvement in the first six months of 2002 compared to the same period in 2001, with net income increasing from $48 million to $160 million. This growth was primarily driven by higher operating cash flows and increased revenue from brokerage commissions and fees, as well as premiums and other.

Why was the net income for the second quarter of 2002 zero, while it was positive in the prior year?

The second quarter of 2002 reported $0 net income, a decrease from $29 million in the prior year's second quarter. This was influenced by several factors, including a favorable $146 million pre-tax adjustment related to the business transformation plan in the second quarter of 2001, which was not present in 2002. Additionally, benefits to policyholders increased significantly in the current quarter.

What is the status of Aon's planned divestiture of its underwriting business?

Aon's Board of Directors had approved a plan to spin off its underwriting businesses. However, due to current market conditions, Aon is now investigating alternative options, including a sale of all or part of the business, or a partial spin-off, rather than the previously planned full spin-off.

How will the adoption of FASB Statement No. 142 affect Aon's financial reporting?

Aon adopted FASB Statement No. 142, 'Goodwill and Other Intangible Assets,' effective January 1, 2002. As a result, goodwill is no longer amortized. This change eliminates prior goodwill amortization expenses, which had a material impact on prior periods' results, and goodwill will now be tested annually for impairment.

AON 10-Q Quarterly Report Q2 FY2002 — Revenue, Net Income, EPS

Q: Has Aon had to restate any of its financial statements?

Yes, Aon has agreed to restate its 2001 and first quarter 2002 financial statements to adjust the timing of an allowance for a reinsurance recoverable related to World Trade Center employee benefits, following comments from the SEC. This change moves the recognition of the allowance from the first quarter of 2002 to the fourth quarter of 2001.

Summary

Aon plc (AON) reported its financial results for the second quarter and first six months of 2002. The company announced a net income of $160 million for the first six months of 2002, a significant increase from $48 million in the same period of 2001. However, the second quarter of 2002 showed a net income of $0 million, compared to $29 million in the prior year's second quarter. This decline in the quarterly performance was influenced by several factors, including a reversal of previously incurred business transformation costs in the prior year and an increase in benefits to policyholders. The company is undertaking a significant business transformation plan and is exploring strategic alternatives for its underwriting business, including a potential sale or spin-off. Despite challenges, Aon's core brokerage and consulting services demonstrated revenue growth, driven by organic expansion and acquisitions. The company also addressed various accounting and disclosure comments from the SEC, which led to restatements of prior period financial statements, notably concerning a reinsurance recoverable related to World Trade Center employee benefits.

Key Highlights

1For the six months ended June 30, 2002, Aon reported a net income of $160 million, a substantial increase from $48 million in the same period of 2001. This improvement was largely driven by a significant increase in cash provided by operating activities ($605 million in 2002 vs. $296 million in 2001).
2The second quarter of 2002 resulted in $0 net income, a decrease from $29 million in the second quarter of 2001. This was partly due to a favorable $146 million adjustment in the prior year's second quarter related to the business transformation plan, which was not present in 2002.
3Total revenue for the second quarter of 2002 was $2,122 million, an increase of 11% from $1,917 million in the second quarter of 2001, driven by growth in brokerage commissions and fees, and premiums and other.
4Aon is in the process of a significant business transformation plan, with a total pretax expense of $294 million recorded across 2000-2002. The company has substantially implemented the plan, reporting expected benefits in improved revenue growth and productivity, though some US retail brokerage components faced delays.
5The company is exploring strategic alternatives for its underwriting business, Combined Specialty Group, including a sale or spin-off, due to current market conditions not being conducive to raising capital for a spin-off as initially planned.
6Aon has resolved accounting and disclosure comments from the SEC, which resulted in restatements of its 2001 and first quarter 2002 financial statements. This primarily involved adjusting the timing of an allowance for a reinsurance recoverable related to World Trade Center employee benefits.
7Goodwill is no longer being amortized as of January 1, 2002, following the adoption of FASB Statement No. 142, which is expected to have a positive impact on future earnings by eliminating prior amortization expenses.

Aon plc Quarterly Report for Q2 Ended Jun 30, 2002

Summary

Key Highlights

Frequently Asked Questions