Aon Sees 12% Increase In Quarterly Income

In 2003, Chicago-based Aon took a $37 million charge for total World Trade Center expenses, which it said accounts for some of the quarter's improvement.

The first quarter results also reflect $43 million of "discretionary incentive compensation" that would have been awarded later in the year, but was moved up to the first quarter. The move would not affect the company's six month or year end results, Aon said.

Patrick G. Ryan, the firm's chairman and chief executive officer, said during an analyst's conference call today, that the future for the firm looked good and that it would achieve its financial goals. He said the firm is sticking with its performance forecast to meet or exceed earnings per share of $2.20 by the end of the year.

Concerning the contingency fees investigation in New York State, Mr. Ryan reiterated what was said in an earlier press release- that Aon is cooperating fully with the State Attorney General's investigation. He added that the firm fully discloses the fees to clients.

"We provide valuable services to underwriters that we need to be compensated for and the underwriters obviously agree," Mr. Ryan commented about the fees. "We feel these agreements are entirely appropriate."

Aon is one of four brokers who publicly announced they received a subpoena from Eliot Spitzer's office requesting information about contingency fees.

In response to a question about how much Aon makes in contingency fees, he said the firm does not break down how much of its revenues come from such fees. However, he hinted strongly that a report by J.P. Morgan, speculating that the firm makes around $200 million a year from contingency fees, would be close to the mark.

Mr. Ryan also said if market conditions were right, it would once again examine possibly spinning off its insurance unit, Combined. In 2002 Aon planned to spin off the company into a separate unit but gave up the idea as stock prices declined.

The company also is looking at continued cost reductions, such as outsourcing its information technology, but no details of the planning were released. Executives said such cost reductions are still in the early stage of development.