Aon Corp.’s fourth-quarter net income soared and the company appears to have made a stunning recovery from the impact of the Sept. 11, 2001, attacks on the World Trade Center.
The Chicago-based insurance brokerage and consulting firm posted fourth-quarter earnings per share up to 59 cents from 10 cents a year ago. Full-year 2002 earnings increased to $1.64 per share from 53 cents per share. Strong demand for Aon’s services and products and an increase in consolidated investment income drove fourth quarter revenues up 16 percent and full year revenues up 15 percent. Aon lost 175 employees who were killed in the World Trade Center on Sept. 11, 2001.
Insurance brokerage and other services segment fourth quarter 2002 reported revenue grew 11 percent to $1.4 billion. Organic revenue growth was 9 percent for the segment and 10 percent for core brokerage. Full-year 2002 organic revenue growth was 13 percent for core brokerage. Core brokerage includes worldwide retail, reinsurance, wholesale and specialty brokerage, plus managing underwriting and claims services. It excludes administration services primarily related to Aon’s underwriting businesses.
Prior-year fourth quarter results included a $24 million fee earned in connection with the formation of Endurance Specialty. Adjusting for this item, core organic revenue growth was 12 percent for fourth quarter and 14 percent for full year 2002. Investment income decreased 24 percent to $22 million, due primarily to declining interest rates.
Reinsurance, international and wholesale brokerage had very good results. U.S. retail brokerage showed continued improvement from the prior year and managing underwriting increased production relative to slower first half 2002 results when an insurance carrier had to be switched for some major programs. Fourth quarter 2001 results included $12 million of transition costs related to the business transformation.
In fourth quarter 2002, Aon received a reimbursement from its property insurers for depreciable assets destroyed on Sept. 11. An $11 million pretax credit was recognized, which represented the difference between insurance recoveries and the net book value of destroyed assets.
WTC credits, as well as charges in the prior year period, were excluded from the segment comparisons noted above. Aon is continuing the normal process of presenting insurance claims to its insurers for losses related to extra expense, business interruption and other coverages.
Additional reimbursements are expected in future quarters for claims that have been or will be filed under insurance policies purchased by Aon from independent insurers.
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