Aon Unhappy With 3Q Performance

By Mark E. Ruquet

NU Online News Service, Nov. 4, 12:30 p.m.EST?The head of Chicago-based insurance broker Aon said hetakes full responsibility for a disappointing third quarterperformance of the firm's brokerage business, but added he expectsoverall business to fall within investor's consensus earnings.

The firm reported net income for the third quarter ending Sept.30, 2003, of $115 million or 36 cents a share, a drop of 10 percentor $13 million, from $128 million or 46 cents a share for the sameperiod last year. Revenues increased for the quarter by 7 percentor $149 million, going from $2.24 billion in 2002 to $2.4billion.

For the nine months, net income has grown $125 million or 43percent, going from $288 million, or $1.03 a share, to $413million, or $1.30 a share. Revenues increased 12 percent, or $765million, going from $6.44 billion to $7.21 billion.

Patrick G. Ryan, Aon's chairman and chief executive officer,said the businesses' brokerage arm did achieve the results itexpected, but both brokerage and reinsurance business drove thefirm's earnings. Consulting, he added, was still under pressurefrom the economy, but poised for improvement. Aon's underwritingbusiness, Combined, showed marked improvements.

"We are not at all satisfied, in fact disappointed, in the thirdquarter results," Mr. Ryan said during an investor's conferencecall. "We have taken and are taking a very hard look at ourfinancial performance."

He said the problems with Aon's performance lay in a lack ofdiscipline in some areas of the firm, not in the quality andperformance of services to clients. However, Aon was still notdoing as well as its peers.

Mr. Ryan took personal responsibility for the failure of thefirm to perform and vowed that improvements would be made. He notedthere would be a "dramatic increase in discipline" within the firm,and threatened to replace managers who did not improve theirperformance.

Brokerage services increased 10 percent in the quarter, or $123million, going from $1.25 billion to $1.37 billion in 2003.Consulting gained 6 percent, or $17 million, going from $269million in the third quarter of 2002 to $286 million. Underwritinggrew 3 percent, or $24 million, going from $718 million to $742million.

Aon reported a loss of $25 million in the quarter fromdiscontinued business, largely from its automobile financeservicing business, which it said it plans to sell.

The firm said it reached a final settlement of approximately$200 million for its World Trade Center property insurance claims.It expects a cash payment of $92 million in the fourth quarter, andhas already received $108 million.

Mr. Ryan said Aon remains comfortable with fourth quarterearnings consensus of between 54 and 58 cents a share, before anybenefit for WTC claims and $2.04 to $2.08 for the year.