Slide 1: The Aon Opportunity
The Aon OpportunityJune 27, 2006 Greg CasePresident & CEOAon Corporation
Slide 2: Safe Harbor Language
Safe Harbor Language This presentation contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which areforward-looking statements as that term is defined in the Private Securities Litigation ReformAct of 1995. These for
Slide 3: Agenda
Agenda•Overview of Aon Corporation•Three key objectives•Financial progress
Slide 4: Three Business Segments
Three Business Segments $9.8 billion 2005 Revenue Aon Corporation Corporation Risk & Insurance Brokerage Services Revenue 55% of Revenue Retail BrokerageReinsurance Brokerage Affinity Managing General Underwriter Captive Insurance Advisor Premium Financing 13% of Revenue Employee Benefits Compensati
Slide 5: Strong Global Presence
Strong Global Presence500 offices 120 countries 46,000 employees Aon Presence
Slide 6: Insurance Brokerage offers compelling price/value leverage
Insurance Brokerage offers compelling price/value leverage U.S. Example $25B+ Brokerage Revenues $275B+ Insurance Premiums $Trillions Insurable Risks • Risk identification / assessment • Program design • Program placement • Claims advocacy • Safety engineering • Technology solutions • Treaty & facul
Slide 7: A number of factors are pressuring brokerage
A number of factors are pressuring brokerage Regulatory Competition Asian Terrorism Growth Insurance Capital Global Brokerage Warming Globalization Revenue Complexity Transparency of Risks Pandemics Consolidation
Slide 8: Aon operates around key objectives
Aon operates around 3 key objectives Deliver Distinctive “Value that makes a difference” Client Value Strengthen Talent “Destination of choice” And Capabilities Achieve Operational “Best return on investment” Excellence
Slide 9: Aon Delivers Distinctive Value to Clients
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence Aon Delivers Distinctive Value to Clients • 46,000 Aon colleagues around the world • Global proprietary network • Global product groups / industries / servicing • Local market focus • Value-added techn
Slide 10: Aon has the strongest owned network with significant, demonstrated value
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence Aon has the strongest owned network with significant, demonstrated value Value of a global network • Seamless handling of global risks • Access to worldwide market capacity • Serve both global and loca
Slide 11: Distinctive client value evident in success attracting and retaining large corporate business
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence Distinctive client value is evident in our recent success in attracting and retaining large corporate business Momentum – Global Large Corporate * (Trailing 4 quarter results) 424 Decisions Made 63% Ao
Slide 12: Balance of Trade in U.S. brokerage business movement
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence in the movement of U.S. brokerage business between Aon and competitors Balance of Trade * (Trailing 4 quarter results) Units Won/Lost 863 # Won 464 # Lost 399 # Net Gain Revenue Gained/Lost $170M $ Won
Slide 13: Retail Client Retention First Quarter 2006
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence Retail Client Retention First Quarter 2006 100% 90% 80% 70% 60% 50% Latin Canada U.S. U.K. Continent Asia, Africa, America of Europe and Middle East 1Q06 vs. 1Q04: 0.6% 0.5% 1.3% (2.0)% (1.3)% 2.1% 1%
Slide 14: Aon is strengthening talent and capability
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence Aon is strengthening talent and capability • Increasingly destination of choice • Strong pool of existing talent • Building an equity-based culture –Performance-based incentives –Incentive paid partial
Slide 15: Aligning employee and shareholder interests with an equity-based culture
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence We are aligning employee and shareholder interests by building a more equity-based culture • Since 2004, 20% of incentives in excess of $50,000 are paid in restricted stock – Greater alignment and rete
Slide 16: Costs are being rationalized
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence Costs are being rationalized Expense Growth Trend for Brokerage and Consulting (Excluding Acquisitions/Dispositions, FX, Settlements & other unusual items) 3% 1.9% 2% 1.3% 1.5% 1% 0% -0.7% -0.3% -0.6%
Slide 17: Significant investments are being made
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence while significant investments are being made Examples Niche acquisitions • Fill geographic gaps • Product/service expansion Greenfield investments • Financial advisory and litigation practice • Affinit
Slide 18: Restructuring program will sustain/accelerate improved financial results
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence Restructuring program will sustain / accelerate improved financial results • $190 million annual run-rate savings in 2008 • $100+ million savings to be realized in 2006 • Company-wide, but focused in B
Slide 19: Five additional areas of focus
Deliver Distinctive Client Value Strengthen Talent And Capabilities Achieve Operational Excellence and there are five additional areas of focus • Information technology • Real estate • Procurement • Offshoring • Outsourcing
Slide 20: Aon is pursuing a number of growth initiatives
Aon is pursuing a number of growth initiatives Examples Client Segment • Global large corporate • Affinity Geography • Asia and other emerging markets • Direct Markets (e.g. Japan & Germany) Product Offering • Captive management • Financial advisory and litigation consulting
Slide 21: Brokerage - First Quarter 2006 Results
Brokerage -First Quarter 2006 Results Organic Revenue Growth 4% 2% 2% 0% -2% -4% -5% -6% 2005 2006 Pretax Income (millions) $300 $249 $240 $240 $180 $120 $60 $0 2005 2006
Slide 22: Brokerage - First Quarter 2006 Results: Pretax Margin
Brokerage -First Quarter 2006 Results Pretax Margin 20% 17.8% 17.9% 18% 16% 14% 12% 10% Adjusted Pretax Margin* 20% 18.0% 18% 16.1% 16% 14% 12% 10% *Adjusted for restructuring charges, NYAG, gain on sale of preferred stock, contingent commissions, stock option expense, & hedging (gains) losses 2005
Slide 23: Making good progress toward 20%+ brokerage margin goal
Making good progress toward 20%+ brokerage margin goal % 25 20.0%+ 20 16.0% 15 13.6% 10 5 FY 2004 * FY 2005 * GOAL *Adjusted for restructuring charges, NYAG & other state settlements, gain on sale of Claims Services business.
Slide 24: Consulting - First Quarter 2006 Results
Consulting -First Quarter 2006 Results Organic Revenue Growth 6% 4% 4% 2% 0% -1% -2% 2005 2006Pretax Income (millions) $40 $30 $30 $26 $20 $10 $0 2005 2006 Pretax Margin 10.0% 9.7% 9.5% 9.0% 8.4% 8.5% 8.0% 7.5% 2005 2006
Slide 25: Insurance Underwriting - First Quarter 2006 Results
Insurance Underwriting -First Quarter 2006 Results Organic Revenue Growth 15% 13% 10% 5% 0% -3% -5% 2005 2006 Pretax Income (millions) $100 $79 $68 $75 $50 $25 $0 2005 2006 Pretax Margin 10% 9.4% 9% 8.6% 8% 7% 6% 5% 2005 2006
Slide 26: The balance sheet has been de-levered, providing significant financial flexibility
The balance sheet has been de-levered, providing significant financial flexibility Total debt and preferred stock Debt/capital ratio DEBT AND PREFERRED: $ Billion $2.5 $2.2 $2.2 $2.1 $2.0 DEBT/CAPITAL: Percent 40% 33% 30% 29% 28% 2002 2003 2004 2005 Q1 '06
Slide 27: Summary
Summary • Expanding quantum and complexity of risk • Leverage global resources / intellectual capital • Rationalize costs while making investments • Compelling opportunity for value creation Aon has tremendous assets and is well-positioned for long-term growth