What were the primary drivers of revenue growth in the second quarter of 2004?

Revenue growth was primarily driven by a favorable impact from foreign exchange rates ($75 million or 3%), an increase in brokerage commissions and fees reflecting improved underwriting commissions, and an increase in premiums and other related to insurance underwriting operations.

How did the adoption of FIN 46 impact the company's financial statements?

The adoption of FIN 46 on December 31, 2003, required Aon to deconsolidate its trust preferred capital securities. This resulted in a shift of interest expense from 'minority interest' to 'interest expense' in the consolidated statements of income. Interest expense increased by $8 million in Q2 2004 and $14 million year-to-date due to the associated notes payable, although underlying debt levels decreased.

What is the company's outlook regarding discontinued operations?

Aon is actively divesting non-core operations. In Q2 2004, the company decided to sell its U.K. reinsurance brokerage runoff unit and a non-core Consulting subsidiary. The U.K. unit was sold in Q3 2004. The operating results of these businesses are classified as discontinued operations.

How is the company managing its investment portfolio and what are the key risks?

Aon's investment portfolio is diversified across fixed maturities, equity securities, and other investments. The fixed maturity portfolio is approximately 97% investment grade. Key risks include interest rate, market, and credit risks. The company regularly reviews investments with unrealized losses for other-than-temporary impairments. The equity portfolio had no gross unrealized loss at June 30, 2004.

AON 10-Q Quarterly Report Q2 FY2004 — Revenue, Net Income, EPS

Summary

Aon plc's (AON) Q2 2004 10-Q filing reveals a solid performance with revenue growth driven by its Risk and Insurance Brokerage Services and Insurance Underwriting segments. Total revenue increased by 6% to $2.5 billion for the quarter and 7% year-to-date to $5.1 billion, benefiting from favorable foreign exchange rates and increased brokerage commissions and fees. The company also saw growth in premiums and other related to its insurance underwriting operations. Despite a 5% increase in total expenses, largely due to foreign exchange impacts, higher pension costs, and the accounting treatment of FIN 46 affecting interest expense, Aon reported a 10% increase in income from continuing operations before income tax and minority interest for the six-month period. Diluted earnings per share for continuing operations were $0.54 in Q2 2004, up from $0.49 in the prior year. The company's financial condition remains strong with total assets growing and stockholders' equity increasing, reflecting solid net income performance.

Key Highlights

1Total revenue increased 6% to $2.5 billion in Q2 2004 and 7% year-to-date to $5.1 billion, driven by strong performance in brokerage commissions, fees, and insurance underwriting premiums.
2Income from continuing operations increased by 10% year-to-date to $371 million, reflecting improved operational performance and effective expense management.
3Diluted earnings per share from continuing operations rose to $0.54 in Q2 2004, up from $0.49 in Q2 2003.
4The company's balance sheet strengthened, with total assets growing to $27.8 billion and total stockholders' equity increasing to $4.7 billion.
5The 'Corporate and Other' segment experienced a significant revenue decrease, primarily due to lower gains from the change in fair value of Endurance warrants compared to the prior year.
6Aon continues to manage its portfolio by selling non-core assets, with the U.K. reinsurance brokerage runoff unit being sold in Q3 2004.
7The company is actively managing its debt, with total debt decreasing by $90 million to $2.1 billion.

Aon plc Quarterly Report for Q2 Ended Jun 30, 2004

Summary

Key Highlights

Frequently Asked Questions