Zero to $146 Million In Aon's Second Quarter

By Mark E. Ruquet

NU Online News Service, Aug. 6, 4:06 p.m. EDT ? Aon Corp. reported net income for the second quarter rose to $146 million after reporting no income for the same period last year, even though the broker saw an 8 percent drop in its underwriting segment.

For the second quarter ending June 30, the Chicago-based broker said revenues rose 15 percent, or $316 million, from $2.12 billion to $2.44 billion. Net income per share rose 46 cents from no income per share for the quarter in 2002.

For the six months, net profit increased $138 million, or 87 percent, going from $159 million to $297 million. Revenues increased $616 million, or 15 percent, from $4.2 billion to $4.83 billion. Earnings per share grew 37 cents, going from 57 cents to 94 cents a share.

The drop in underwriting, Aon said, was primarily due to "back-to-basics strategy" within it's accident and health and life underwriting that dropped 15 percent from $441 million in the second quarter of 2002 to $377 million this quarter.

Aon also reported a $9 million World Trade Center-related charge for lease space and $34 million benefit pension cost increase that affected earnings. The firm reported a $19 million decline in its claims services.

A research report by Morgan Stanley, however, said it was disappointed with the firm's second-quarter report. It said Aon's brokerage business margins did not hit its projections.

The investment firm also added that it had questions about the firm's earning guidance for the year. Morgan Stanley said how Aon achieves its guidance would be "very different" from how the investment firm thought it would be done.

Patrick G. Ryan, chairman and chief executive officer of Aon, said in an analyst conference call today that he felt margins were good, but not where the company wanted them to be. He said that the firm showed growth through new business and a high retention rate, adding, "Organic growth is doing well, but margins still need improvement."

On the claims services side, Mr. Ryan said the decline was due to some carriers it contracted with going into receivership, resulting in less income, as this business was moved into guarantee funds.

Mr. Ryan said Aon is looking to form partnerships with other businesses in claims services in the U.S. and sell off some parts of its United Kingdom business. He declined to name the partners Aon is in discussion with, but said, "We expect to resolve the direction we are going in by the end of the year." This strategic discussion, he explained, has been going on since the third quarter of last year and is not impacted by this year's second-quarter report.

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Zero to $146 Million In Aon's Second Quarter

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