10-K 1 b10kdec2002.txt AON CORPORATION -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission File Number: 1-7933 Aon Corporation (Exact Name of Registrant as Specified in its Charter) DELAWARE (State or Other Jurisdiction of 36-3051915 Incorporation or Organization) (I.R.S. Employer 200 E. RANDOLPH STREET, Identification No.) CHICAGO, ILLINOIS 60601 (Address of Principal Executive Offices) (Zip Code) (312) 381-1000 (Telephone Number) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered -------------------------- ------------------------ Common Stock, $1 par value New York Stock Exchange 7.40% Notes Due 2002 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements, incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 25, 2002 was $8,384,338,140. Number of shares of $1.00 par value Common Stock outstanding as of February 25, 2002 was 271,430,890. DOCUMENTS FROM WHICH INFORMATION IS INCORPORATED BY REFERENCE: Annual Report to Stockholders of the Registrant for the Year 2001 (Parts I, II and IV) Notice of Annual Meeting of Holders of Common Stock and Series C Preferred Stock and Proxy Statement for Annual Meeting of Stockholders of the Registrant on April 19, 2002 (Part III) -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS. The Registrant is a holding company whose operating subsidiaries carry on business in three distinct operating segments: (i) insurance brokerage and other services, (ii) consulting, and (iii) insurance underwriting. Incorporated in 1979, it is the parent corporation of long-established and more recently formed companies. The Registrant acquired in 2001, among other companies and businesses, ASI Solutions Incorporated (ASI), a worldwide provider of human resources administration and compensation consulting services, and First Extended, Inc., an underwriter and administrator of automobile extended warranty products. The Insurance Brokerage and Other Services segment consists principally of Aon's retail, reinsurance and wholesale brokerage, as well as related insurance services, including claims services, underwriting management, captive insurance company management services and premium financing. These services are provided by subsidiaries of Aon Group, Inc., and certain other indirect subsidiaries of the Registrant (the "Aon Group") including Aon Risk Services Companies, Inc.; Aon Holdings International bv; Aon Services Group, Inc.; Aon Re Worldwide, Inc.; Aon Limited (U.K.); Cananwill, Inc.; and Premier Auto Finance, Inc. The Consulting segment provides a full range of human capital management services utilizing five practices: employee benefits, compensation, management consulting, outsourcing and communications. These services are provided primarily by subsidiaries and affiliates of Aon Consulting Worldwide, Inc. which is also a subsidiary of Aon Group. Aon's Insurance Underwriting segment is comprised of supplemental accident and health and life insurance, and extended warranty and casualty insurance products and services. Combined Insurance Company of America("Combined Insurance") engages in the marketing and underwriting of accident and health and life insurance products. Combined Specialty Insurance Company (formerly known as Virginia Surety Company, Inc.)and London General Insurance Company Limited offer extended warranty and casualty insurance products and services. In November 2000, the Registrant announced a business transformation plan, which began in fourth quarter 2000 and will continue into 2002. The transformation plan will affect each operating segment; however, most changes will affect the largest operating segment, Insurance Brokerage and Other Services, and will occur in the major countries of operation, the U.S. and the United Kingdom. In April 2001, the Registrant announced a plan to spin off its insurance underwriting business to Aon's common stockholders, creating two independent, publicly-traded companies. The spin-off companies will be named Combined Specialty Corporation. The transaction requires final Board of Directors approval, a favorable Internal Revenue Service tax ruling and certain insurance regulatory approvals and is currently expected to be completed in spring 2002. The Registrant hereby incorporates by reference "Business Transformation Plan" on page 43 of the Annual Report to Stockholders of the Registrant for the Year 2001 ("Annual Report"), as well as pages 6 through 15, 23 through 27, and pages 58, 59 and 63 of the Annual Report. COMPETITION AND INDUSTRY POSITION (1) INSURANCE BROKERAGE AND OTHER SERVICES Aon Group, Inc.; Aon Risk Services Companies, Inc.; Aon Limited (U.K.); Aon Holdings International bv; Aon Services Group, Inc.; Aon Re Worldwide, Inc.; Cananwill, Inc.; and Premier Auto Finance, Inc. Aon Group affiliated companies conduct the Registrant's brokerage and consulting operations, and have 550 offices around the world in over 125 countries and sovereignties. In 2001, those companies employed nearly 43,000 professionals and support personnel to serve the diverse needs of clients. Aon Group's retail brokerage companies operate in a highly competitive industry and compete with a large number of retail insurance brokerage and agency firms as well as individual brokers and agents and direct writers of insurance coverage. Aon Group's companies provide a broad spectrum of advisory and outsourcing services including risk identification and assessment, alternative risk financing, safety engineering, loss management and program administration for clients. They also design, place and implement customized insurance products. They have also developed certain specialist areas such as marine, aviation, directors' and officers' and professional liability, financial institutions, construction, energy, media, healthcare and entertainment. In 2001, investments were made in professional talent, technology, process improvement and the development of specialized products and services to meet the evolving needs of clients. Those companies operate through offices located in North America, Europe, Latin America, Africa, Australia and Asia/Pacific. Aon Group's companies address the highly specialized product development, consulting and administrative risk management needs of professional groups, service businesses, governments, healthcare providers and commercial organizations. They also provide underwriting management skills, claims and risk management expertise, and third-party administration services to insurance companies, and insurance brokerage services for individuals. They market and broker both the primary and reinsurance risks of these programs. For individuals, associations and businesses, affinity products for professional liability, life, disability income and personal lines are provided. Aon's reinsurance brokerage activities are organized primarily under Aon Re in the United States and Aon Limited in the United Kingdom, constituting the largest reinsurance broker in the world and offering sophisticated advisory services in program design that enhance the risk/return characteristics of insurance policy portfolios and improve capital utilization, along with the evaluation of catastrophic loss exposures. The companies also participate in placement and captive management services. Premium-related financing services are available to clients of Aon Group and other independent organizations through Cananwill. Certain retail automotive organizations have also been provided a service which purchases a select amount of their auto financing and leasing contracts from individuals and sells them to unaffiliated parties through companies associated with Premier Auto Finance, Inc., which then continue the management of collections on the contracts and provide other related services. After March 2001, contract purchasing by companies associated with Premier Auto Finance, Inc. were no longer generally available, but service continued on existing contracts with current clients. (2) CONSULTING Aon Consulting Worldwide, Inc. Aon Consulting Worldwide, Inc. is one of the world's largest integrated human capital consulting organizations. The operations of this segment provide a full range of human capital management services that serve three major client segments - large corporations, middle market companies and small firms. Around the world, companies have to find advanced ways to attract and retain workers with the right skill levels and commitments, and we anticipate an increased demand for consulting services. Aon Consulting, with its expertise in employee benefits, compensation, management consulting, outsourcing and communication, and its access to the Registrant's other subsidiaries, is well-positioned to serve this market. Aon Consulting subsidiaries offer services to clients including construction and implementation of benefit packages, proprietary research on employee commitment and loyalty; compensation design; assistance in process improvement and design, leadership, organization and human capital development; employment processing, performance improvement, benefits administration and other employment services; and advice to companies on initiatives to support their corporate vision. The 2001 acquisition of ASI and the 2000 acquisition of Actuarial Sciences Associates, Inc. expanded Aon's ability to provide outsourcing services to a broad spectrum of large corporate clients. (3) INSURANCE UNDERWRITING Combined Insurance Company of America ("Combined Insurance"); Combined Life Insurance Company of New York ("CLICNY"); Combined Specialty Insurance Company (CSIC); London General Insurance Company Limited ("London General"); and Aon Warranty Group, Inc. ("Aon Warranty"). The Registrant's insurance underwriting subsidiaries are part of a highly competitive industry that serves individual consumers in North America, Europe, Latin America and Asia/Pacific by providing accident and health coverage, traditional life insurance and extended warranty and casualty insurance products and services through distribution networks, most of which are directly owned by the Registrant's subsidiaries. The supplemental accident and health and life distribution network encompasses primarily the agents of Combined Insurance and CLICNY (which operates exclusively in the State of New York). Combined Insurance, the Registrant's principal accident and health and life insurer, has a sales force of 7,000 career agents calling on individuals to sell a broad spectrum of low premium, low limit accident and health products. In addition, Combined Insurance has developed relationships with select brokers and consultants to reach specific niche markets. Combined Insurance offers a wide range of accident, sickness, short-term disability and other supplemental insurance products. Most of Combined Insurance's products are primarily fixed-indemnity obligations, thereby not subject to escalating medical costs. Combined Insurance offers a simplified accident and sickness long-term disability policy. Combined Insurance has expanded its product distribution to include direct response programs, affinity groups and worksite marketing, creating access to new markets and potential new policyholders. Combined Insurance's business is conducted in the United States, Canada, Latin America, Europe and Asia/Pacific. The Registrant's extended warranty and casualty insurance business, conducted by CSIC, its branches and subsidiaries in North America, South America and Asia/Pacific and London General in Europe, provides warranties on automobiles and a variety of consumer goods, including electronics and appliances. In addition, these subsidiaries provide non-structural home warranties and other warranty products, such as credit card enhancements and affinity warranty programs. CSIC and London General are among the world's largest underwriters of consumer extended warranties. The extended warranty products are sold in the United States, Canada, Latin America, Europe and Asia/Pacific. The administration of certain warranty services on automobiles, electronic goods, personal computers and appliances is handled by certain operations in the Insurance Brokerage and Other Services segment. Revenues earned from this area will be reflected as revenues in CSC after the planned spin-off. A new initiative was recently launched to begin actively writing commercial property and casualty risks, consisting primarily of excess and surplus lines, errors and omissions, excess liability and workers' compensation. In 2001, the Registrant's underwriting business invested $227 million to obtain an ownership interest in Endurance Specialty Insurance, Ltd., which offers property and casualty insurance and reinsurance on a worldwide basis. The investment will help provide much needed underwriting capacity to commercial firms and insurance and reinsurance customers and will allow the underwriting business to participate in the growth expected in these areas. (4) DISCONTINUED OPERATIONS The Registrant hereby incorporates by reference note 6 of the Notes to Consolidated Financial Statements on page 44 of the Annual Report. LICENSING AND REGULATION Regulatory authorities in the states or countries in which the operating subsidiaries of Aon Group conduct business may require individual or company licensing to act as brokers, agents, third party administrators, managing general agents, reinsurance intermediaries or adjusters. Under the laws of most states in the United States and in most foreign countries, regulatory authorities have relatively broad discretion with respect to granting, renewing and revoking brokers' and agents' licenses to transact business in the state or country. The manner of operating in particular states and countries may vary according to the licensing requirements of the particular state or country, which may require, among other things, that a firm operate in the state or country through a local corporation. In a few states and countries, licenses are issued only to individual residents or locally-owned business entities. In such cases, Aon Group subsidiaries have arrangements with residents or business entities licensed to act in the state or country. Insurance companies must comply with laws and regulations of the jurisdictions in which they do business. These laws and regulations are designed to ensure financial solvency of insurance companies and to require fair and adequate service and treatment for policyholders. They are enforced by the states in the United States, by industry self-regulating agencies in the United Kingdom, and by various regulatory agencies in other countries through the granting and revoking of licenses to do business, licensing of agents, monitoring of trade practices, policy form approval, minimum loss ratio requirements, limits on premium and commission rates, and minimum reserve and capital requirements. Compliance is monitored by the state insurance departments through periodic regulatory reporting procedures and periodic examinations. The quarterly and annual financial reports to the regulators in the United States utilize statutory accounting principles which are different from accounting principles generally accepted in the United States which are used in stockholders' reports. The statutory accounting principles, in keeping with the intent to assure the protection of policyholders are based, in general, on a liquidation concept while accounting principles generally accepted in the United States are based on a going-concern concept. The state insurance regulators are members of the National Association of Insurance Commissioners ("NAIC"). The NAIC seeks to promote uniformity of, and to enhance the state regulation of, insurance. Both the NAIC and the individual states continue to focus on the solvency of insurance companies and their conduct in the market place. This focus is reflected in additional regulatory oversight by the states and emphasis on the enactment or adoption of a series of NAIC model laws and regulations designed to promote solvency. The NAIC revised its Accounting Practices and Procedures Manual in a process referred to as Codification. The revised manual was effective January 1, 2001. The domiciliary states of Aon's major insurance subsidiaries have adopted the provisions of the revised manual. The revised manual has changed, to some extent, prescribed statutory accounting practices and resulted in changes to the accounting practices that Aon's major insurance subsidiaries use to prepare their statutory-basis financial statements. The impact of these changes to Aon's major insurance subsidiaries was to increase the statutory capital and surplus by $54 million as of January 1, 2001. Several years ago, the NAIC developed a formula for analyzing insurers called risk-based capital ("RBC"). RBC is intended to establish "minimum" capital threshold levels that vary with the size and mix of a company's business. It is designed to identify companies with the capital levels that may require regulatory attention. RBC does not have any significant impact on the insurance business of the Registrant. The state insurance holding company laws require prior notice to and approval of the domestic state insurance department of intracorporate transfers of assets within the holding company structure, including the payment of dividends by insurance company subsidiaries. In addition, the premium finance loans by Cananwill, Inc., an indirect wholly-owned subsidiary of the Registrant, are subject to one or more of truth-in-lending and credit regulations, insurance premium finance acts, retail installment sales acts and other similar consumer protection legislation. Failure to comply with such laws or regulations can result in the temporary suspension or permanent loss of the right to engage in business in a particular jurisdiction as well as other penalties. Recent federal and state laws and proposals mandating specific practices by medical insurers and the health care industry will not, because of the nature of the business of the Registrant's subsidiaries, materially affect the Registrant. Numerous states have had legislation introduced to reform the health care system and such legislation has passed in several states. While it is impossible to forecast the precise nature of future federal and state health care changes, the Registrant does not expect a major impact on its operations because of the supplemental nature of most of the policies issued by its insurance subsidiaries and because the coverages are primarily purchased to provide, on a fixed-indemnity basis, protection against loss-of-time or disability benefits. Congress has passed the Financial Services Modernization Act commonly known as S 900 or the Gramm, Leach, Bliley Act. While S 900 makes substantial changes in allowing financial organizations to diversify, the Registrant does not believe its enactment will have a material effect on the business of its insurance subsidiaries. CLIENTELE No significant part of the Registrant's or its subsidiaries' business is dependent upon a single client or on a few clients, the loss of any one of which would have a material adverse effect on the Registrant. EMPLOYEES The Registrant's subsidiaries had approximately 53,000 employees at the end of 2001 of whom approximately 46,000 are salaried and hourly employees and the remaining 7,000 are career agents who are generally compensated wholly or primarily by commission. ITEM 2. PROPERTIES. The Registrant's subsidiaries own and occupy office buildings in six states and certain foreign countries, and lease office space elsewhere in the United States and in various foreign cities. In general, no difficulty is anticipated in negotiating renewals as leases expire or in finding other satisfactory space if the premises become unavailable. ITEM 3. LEGAL PROCEEDINGS. The Registrant hereby incorporates by reference note 15 of the Notes to Consolidated Financial Statements on page 57 of the Annual Report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. EXECUTIVE OFFICERS OF THE REGISTRANT Executive officers of the Registrant are regularly elected by its Board of Directors at the annual meeting of the Board which is held following each annual meeting of the stockholders of the Registrant. The executive officers of the Registrant were elected to their current positions on April 20, 2001 to serve until the meeting of the Board following the annual meeting of stockholders on April 19, 2002. Ages shown are as of December 31, 2001. For information concerning certain directors and executive officers of the Registrant, see item 10 below. As of March 1, 2002, the following individuals are also executive officers of the Registrant as defined in Rule 16a-1(f):
HAS CONTINUOUSLY SERVED AS AN OFFICER OF REGISTRANT OR NAME, AGE, AND ONE OR MORE OF CURRENT OFFICE ITS SUBSIDIARIES BUSINESS EXPERIENCE OR PRINCIPAL POSITION SINCE PAST 5 YEARS --------------------- ----- ------------ Harvey N. Medvin, 65 1972 Mr. Medvin became Vice President and Chief Executive Vice President and Financial Officer of the Registrant in 1982 and Chief Financial Officer was elected to his current position in 1987. He also serves as a Director or Officer of certain of the Registrant's subsidiaries. Michael A. Conway, 54 1990 Mr. Conway was Vice President of Combined Senior Vice President and Insurance from 1980 to 1984. Following other Senior Investment Officer employment, Mr. Conway rejoined the Registrant in 1990 as Senior Vice President of Combined Insurance and was elected to his current position in 1991. He also serves as Director or Officer of certain of the Registrant's subsidiaries.
PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. The Registrant's $1.00 par value common shares ("Common Shares") are traded on the New York stock exchange. The Registrant hereby incorporates by reference the "Dividends paid per share" and "Price range" data on page 61 of the Annual Report. The Registrant had approximately 11,912 holders of record of its Common Shares as of February 25, 2002. The Registrant hereby incorporates by reference note 11 of the Notes to Consolidated Financial Statements on pages 48 and 49 of the Annual Report. ITEM 6. SELECTED FINANCIAL DATA. The Registrant hereby incorporates by reference the "Selected Financial Data" table on page 61 of the Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Registrant hereby incorporates by reference "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 18 through 31 and "Information Concerning Forward-Looking Statements" on the inside back cover of the Annual Report. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Registrant hereby incorporates by reference "Market Risk Exposure" on page 31 of the Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Registrant hereby incorporates by reference the following statements, notes and data from the Annual Report. Page(s) ------- Consolidated Financial Statements ............................ 32 - 36 Notes to Consolidated Financial Statements ................... 37 - 59 Report of Ernst & Young LLP, Independent Auditors ............ 60 Quarterly Financial Data ..................................... 62 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The Registrant hereby incorporates by reference the information on pages 3, 6 and 7 of the Proxy Statement For The Annual Meeting of the Stockholders on April 19, 2002, of the Registrant ("Proxy Statement") concerning the following Directors of the Registrant, each of whom also serves as an executive officer of the Registrant as defined in Rule 16a-1(f): Patrick G. Ryan, Michael D. O'Halleran and Raymond I. Skilling. Information concerning additional executive officers of the Registrant is contained in Part I hereof, pursuant to General Instruction G(3) and Instruction 3 to Item 401(b) of Regulation S-K. The Registrant also hereby incorporates by reference the information on pages 10 and 11 of the Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION. The Registrant hereby incorporates by reference the information under the headings "Executive Compensation," "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values," "Option Grants in 2001 Fiscal Year" and "Pension Plan Table" on pages 14 through 17 of the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The Registrant hereby incorporates by reference the share ownership data contained on pages 2, 8 and 9 of the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Registrant hereby incorporates by reference the information under the heading "Transactions With Management" on pages 21 and 22 of the Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (A) (1) AND (2). The Registrant has incorporated by reference from the Annual Report (see Item 8) the following consolidated financial statements of the Registrant and subsidiaries:
Annual Report Page(s) ------- Consolidated Statements of Financial Position - As of December 31, 2001 and 2000 32 - 33 Consolidated Statements of Income - Years Ended December 31, 2001, 2000 and 1999 34 Consolidated Statements of Cash Flows - Years Ended December 31, 2001, 2000 and 1999 35 Consolidated Statements of Stockholders' Equity - Years Ended December 31, 2001, 2000 and 1999 36 Notes to Consolidated Financial Statements 37 - 59 Report of Ernst & Young LLP, Independent Auditors 60 Quarterly Financial Data 62 Financial statement schedules of the Registrant and consolidated subsidiaries not included in the Annual Report but filed herewith: Consolidated Financial Statement Schedules - Schedule -------- Condensed Financial Information of Registrant I Valuation and Qualifying Accounts II All other schedules for Aon Corporation and Subsidiaries have been omitted because the required information is not present in amounts sufficient to require submission of the schedules or because the information required is included in the respective financial statements or notes thereto. The following supplementary schedules have been provided for Aon Corporation and Subsidiaries as they relate to the insurance underwriting operations: Schedule -------- Summary of Investments Other than Investments in Related Parties II.1 Reinsurance II.2 Supplementary Insurance Information II.3
(A)(3). EXHIBITS (a) Second Restated Certificate of Incorporation of the Registrant - incorporated by reference to Exhibit 3(a) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1991 (the "1991 Form 10-K"). (b) Certificate of Amendment of the Registrant's Second Restated Certificate of Incorporation - incorporated by reference to Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 (the "First Quarter 1994 Form 10Q"). (c) Certificate of Amendment of the Registrant's Second Restated Certificate of Incorporation - incorporated by reference to Exhibit 3 to the Registrant's current Form 8-K, dated May 9, 2000. (d) Amended Bylaws of the Registrant - incorporated by reference to Exhibit 3(d) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2000 (the "2000 Form 10-K"). (e) Indenture dated September 15, 1992 between the Registrant and Continental Bank Corporation (now known as Bank of America Illinois), as Trustee - incorporated by reference to Exhibit 4(a) to the Registrant's Current Report on Form 8-K dated September 23, 1992. (f) Resolutions establishing terms of 7.40% Notes Due 2002 - incorporated by reference to Exhibits 4(d) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1992 (the "1992 Form 10-K"). (g) Resolutions establishing the terms of 6.70% Notes Due 2003 and 6.30% Notes Due 2004 incorporated by reference to Exhibits 4(c) and 4(d) of the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1993 (the "1993 Form 10-K"). (h) Resolutions establishing the terms of the 6.90% Notes Due 2004, incorporated by reference to Exhibit 4(e) of the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1999 (the "1999 Form 10-K"). (i) Resolutions establishing the terms of the 8.65% Notes due 2005, incorporated by reference to Exhibit 4(f) of the 2000 Form 10-K. (j) Junior Subordinated Indenture dated as of January 13, 1997 between the Registrant and The Bank of New York, as trustee - incorporated by reference to Exhibit 4.1 of the Registrant's Amendment No. 1 to Registration Statement on Form S-4 No. 333-21237 dated March 27, 1997 (the "Capital Securities Registration"). (k) First Supplemental Indenture dated as of January 13, 1997 between the Registrant and the Bank of New York, as trustee - incorporated by reference to Exhibit 4.2 of the Capital Securities Registration. (l) Certificate of Trust of Aon Capital A - incorporated by reference to Exhibit 4.3 of the Capital Securities Registration. (m) Amended and Restated Trust Agreement of Aon Capital A dated as of January 13, 1997 among the Registrant, as Depositor, The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, the Administrative Trustees named therein and the holders, from time to time, of the Capital Securities - incorporated by reference to Exhibit 4.5 of the Capital Securities Registration. (n) Capital Securities Guarantee Agreement dated as of January 13, 1997 between the Registrant and the Bank of New York, as guarantee trustee - incorporated by reference to Exhibit 4.8 of the Capital Securities Registration. (o) Capital Securities Exchange and Registration Rights Agreement dated as of January 13, 1997 among the Registrant, Aon Capital A and Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. - incorporated by reference to Exhibit 4.10 of the Capital Securities Registration. (p) Debenture Exchange and Registration Rights Agreement dated as of January 13, 1997 among the Registrant, Aon Capital A and Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. - incorporated by reference to Exhibit 4.11 of the Capital Securities Registration. (q) Guarantee Exchange and Registration Rights Agreement dated as of January 13, 1997 among the Registrant, Aon Capital A and Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. - incorporated by reference to Exhibit 4.12 of the Capital Securities Registration. (r) Certificate of Designation for the Registrant's Series C Cumulative Preferred Stock - incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated February 9, 1994. (s) Registration Rights Agreement dated November 2, 1992 by and between the Registrant and Frank B. Hall & Co., Inc. - incorporated by reference to Exhibit 4(c) to the Third Quarter 1992 Form 10-Q. (t) Registration rights agreement by and among the Registrant and certain affiliates of Ryan Insurance Group, Inc. (including Patrick G. Ryan and Andrew J. McKenna) - incorporated by reference to Exhibit (f) to the 1982 Form 10-K. (u) Aon Corporation Outside Director Deferred Compensation Agreement by and among the Registrant and Registrant's directors who are not salaried employees of Registrant or Registrant's affiliates. (v) Amendment and Waiver Agreement dated as of November 4, 1991 among the Registrant and each of Patrick G. Ryan, Shirley Ryan, Ryan Enterprises Corporation and Harvey N. Medvin - incorporated by reference to Exhibit 10(j) to the 1991 Form 10-K. (w) Statement regarding Computation of Ratio of Earnings to Fixed Charges. (x) Statement regarding Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. (y) Aon Corporation 1994 Amended and Restated Outside Director Stock Award Plan - incorporated by reference to Exhibit 10(b) to the First Quarter 1994 Form 10-Q. (z) Annual Report to Stockholders of the Registrant for the year ended December 31, 2001 (for information, and not to be deemed filed, except for those portions specifically incorporated by reference herein). (aa) List of Subsidiaries of the Registrant. (ab) Consent of Ernst & Young LLP to the incorporation by reference into Aon's Annual Report on Form 10-K of its report included in the 2001 Annual Report to Stockholders and into Aon's Registration Statement Nos. 33-27984, 33-42575, 33-59037, 333-21237, 333-50607, 333-55773, 333-78723, 333-49300, 333-57706, 333-65624 and 333-74364. (ac) Annual Report to the Securities and Exchange Commission on Form 11-K for the Aon Savings Plan for the year ended December 31, 2001 - to be filed by amendment as provided in Rule 15d- 21(b). (ad) Executive Compensation Plans and Arrangements: (A) Aon Stock Award Plan (as amended and restated through February 2000) - incorporated by reference to Exhibit 10 (a) to the Registrant's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the Quarter ended June 30, 2000 (the "Second Quarter 2000 Form 10-Q"). (B) Aon Stock Option Plan (as amended and restated through 1997) - incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarter ended March 31, 1997 (the "First Quarter 1997 Form 10-Q"). (C) First Amendment to the Aon Stock Option Plan as amended and restated through 1997 - incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the Quarter ended March 31, 1999 (the "First Quarter 1999 Form 10-Q"). (D) Aon Stock Award Plan (as amended and restated through 1997) - incorporated by reference to Exhibit 10(b) to the First Quarter 1997 Form 10-Q. (E) First Amendment to the Aon Stock Award Plan as Amended and Restated Through 1997 - incorporated by reference to Exhibit 10(b) to the First Quarter 1999 Form 10-Q. (F) Aon Corporation 1995 Senior Officer Incentive Compensation Plan incorporated by reference to Exhibit 10(p) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K"). (G) Aon Deferred Compensation Plan and First Amendment to the Aon Deferred Compensation Plan - incorporated by reference to Exhibit 10(q) of the 1995 Form 10-K. (H) 1999 Aon Deferred Compensation Plan incorporated by reference to Exhibit 10(1) of the 1999 Form 10-K. (I) Employment Agreement dated June 1, 1993 by and among the Registrant, Aon Risk Services, Inc. and Michael D. O'Halleran, incorporated by reference to Exhibit 10(p) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1998. (J) Aon Severance Plan - incorporated by reference to Exhibit 10 to the Registrant's Quarterly Report to the Securities and Exchange Commission and Form 10-Q for the quarter ended June 30, 1997. (ae) Asset Purchase Agreement dated July 24, 1992 between the Registrant and Frank B. Hall & Co. Inc. - incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10- Q for the period ended June 30, 1992. (af) Stock Purchase Agreement by and among the Registrant, Combined Insurance Company of America, Union Fidelity Life Insurance Company and General Electric Capital Corporation dated as of November 11, 1995 - incorporated by reference to Exhibit 10(s) of the 1995 Form 10-K. (ag) Stock Purchase Agreement by and among the Registrant; Combined Insurance Company of America; The Life Insurance Company of Virginia; Forth Financial Resources, Ltd.; Newco Properties, Inc.; and General Electric Capital Corporation dated as of December 22, 1995 - incorporated by reference to Exhibit 10(t) of the 1995 Form 10-K. (ah) Agreement and Plan of Merger among the Registrant; Subsidiary Corporation, Inc. ("Purchaser"); and Alexander & Alexander Services Inc. ("A&A") dated as of December 11, 1996 - incorporated by reference to Exhibit (c)(1) of the Registrant's Tender Offer Statement on Schedule 14D-1 filed by the Registrant with the Securities and Exchange Commission ("SEC") on December 16, 1996 (the "Schedule 14D-1"). (ai) First Amendment to Agreement and Plan of Merger, dated as of January 7, 1997, among the Registrant, Purchaser and A&A - incorporated by reference to Exhibit (c)(3) to the Schedule 14D-1 filed by the Registrant with the SEC on January 9, 1997. (aj) Agreement and Plan of Merger dated July 16, 2001 among Aon Corporation, Ryan Holding Corporation of Illinois, Ryan Enterprises Corporation of Illinois, Holdco #1, Inc., Holdco #2, Inc., Patrick G. Ryan, Shirley W. Ryan and the stockholders of Ryan Holding Corporation of Illinois and of Ryan Enterprises Corporation of Illinois set forth on the signature pages thereto - incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the Quarter ended June 30, 2001 (the "Second Quarter 2001 Form 10-Q"). (ak) Stock Restriction Agreement dated July 16, 2001 among Aon Corporation, Patrick G. Ryan, Shirley W. Ryan, Patrick G. Ryan Jr., Robert J.W. Ryan, the Corbett M.W. Ryan Living Trust dated July 13, 2001, the Patrick G. Ryan Living Trust dated July 10, 2001, the Shirley W. Ryan Living Trust dated July 10, 2001, the 2001 Ryan Annuity Trust dated April 20, 2001 and the Family GST Trust under the PGR 2000 Trust dated November 22, 2000 - incorporated by reference to Exhibit 10.2 to the Second Quarter 2001 Form 10-Q. (al) Escrow Agreement dated July 16, 2001 among Aon Corporation, Patrick G. Ryan, Shirley W. Ryan, Patrick G. Ryan, Jr., Robert J.W. Ryan, the Corbett M. W. Ryan Living Trust dated July 13, 2001, the Patrick G. Ryan Living Trust dated July 10, 2001, the Shirley W. Ryan Living Trust dated July 10, 2001, the 2001 Ryan Annuity Trust dated April 20, 2001 and the Family GST Trust under the PGR 2000 Trust dated November 22, 2000 and American National Bank and Trust Company of Chicago, as escrow agent - incorporated by reference to Exhibit 10.3 to the Second Quarter 2001 Form 10-Q. (am) Indenture dated December 13, 2001, between the Registrant and the Bank of New York as Trustee (Floating Rate Notes due 2003). (an) Indenture dated December 13, 2001, between the Registrant and the Bank of New York as Trustee (6.2% Notes due 2007). (ao) Indenture dated December 31, 2001 between Private Equity Partnerships Structure I, LLC, as issuer and the Bank of New York as Trustee, Custodian, Calculation Agent, Note Registrar, Transfer Agent and Paying Agent. (B) REPORTS ON FORM 8-K. During the quarter ended December 31, 2001, the Registrant filed three Current Reports on Form 8-K. (i) A Current Report on Form 8-K dated November 8, 2001 reporting its third quarter 2001 results and updating the status of its business transformation plan, the impact of September 11, 2001 attacks and spin-off plans. (ii) A Current Report on Form 8-K dated December 3, 2001 reporting pro-forma financial statements relating to previously announced plans to spin-off its insurance underwriting operations. (iii) A Current Report on Form 8-K dated December 4, 2001 announcing that the Company had filed a $750 million universal shelf registration with the Securities and Exchange Commission. SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 15TH DAY OF MARCH, 2002. Aon Corporation By: /s/ PATRICK G. RYAN ---------------------------- Patrick G. Ryan, Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ PATRICK G. RYAN Chairman, Chief Executive March 15, 2002 ---------------------------------------- Officer and Director Patrick G. Ryan (Principal Executive Officer) /s/ FRANKLIN A. COLE Director March 15, 2002 ---------------------------------------- Franklin A. Cole /s/ EDGAR D. JANNOTTA Director March 15, 2002 ---------------------------------------- Edgar D. Jannotta /s/ LESTER B. KNIGHT Director March 15, 2002 ---------------------------------------- Lester B. Knight /s/ PERRY J. LEWIS Director March 15, 2002 ---------------------------------------- Perry J. Lewis /s/ ANDREW J. McKENNA Director March 15, 2002 ---------------------------------------- Andrew J. McKenna /s/ ROBERT S. MORRISON Director March 15, 2002 ---------------------------------------- Robert S. Morrison /s/ RICHARD C. NOTEBAERT Director March 15, 2002 ---------------------------------------- Richard C. Notebaert /s/ MICHAEL D. O'HALLERAN Director March 15, 2002 ---------------------------------------- Michael D. O'Halleran
SIGNATURE TITLE DATE --------- ----- ---- /s/ DONALD S. PERKINS Director March 15, 2002 ---------------------------------------- Donald S. Perkins /s/ JOHN W. ROGERS, JR. Director March 15, 2002 ---------------------------------------- John W. Rogers, Jr. /s/ GEORGE A. SCHAEFER Director March 15, 2002 ---------------------------------------- George A. Schaefer /s/ RAYMOND I. SKILLING Director March 15, 2002 ---------------------------------------- Raymond I. Skilling /s/ FRED L. TURNER Director March 15, 2002 ---------------------------------------- Fred L. Turner /s/ ARNOLD R. WEBER Director March 15, 2002 ---------------------------------------- Arnold R. Weber /s/ CAROLYN Y. WOO Director March 15, 2002 ---------------------------------------- Carolyn Y. Woo /s/ HARVEY N. MEDVIN Executive Vice President March 15, 2002 ---------------------------------------- and Chief Financial Officer Harvey N. Medvin (Principal Financial and Accounting Officer)
SCHEDULE I Aon Corporation (PARENT COMPANY) CONDENSED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31 ----------------------------------- (millions) 2001 2000 ---------------- ---------------- ASSETS Investments in subsidiaries $ 6,608 $ 6,127 Other investments 20 - Notes receivable - subsidiaries 58 515 Cash and cash equivalents 4 1 Other assets 39 111 ---------------- ---------------- TOTAL ASSETS $ 6,729 $ 6,754 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Short-term borrowings $ 254 $ 853 6.3% long-term debt securities 100 100 7.4% long-term debt securities 100 100 8.65% long-term debt securities 250 250 6.9% long-term debt securities 250 250 6.7% long-term debt securities 150 150 6.2% long-term debt securities 250 - Floating rate long-term debt securities 150 - Subordinated debt 800 800 Notes payable - subsidiaries 595 571 Notes payable - other 70 70 Accrued expenses and other liabilities 189 172 ---------------- ---------------- TOTAL LIABILITIES 3,158 3,316 ---------------- ---------------- Redeemable Preferred Stock 50 50 STOCKHOLDERS' EQUITY Common stock 293 264 Paid-in additional capital 1,654 706 Accumulated other comprehensive loss (535) (377) Retained earnings 3,077 3,127 Less treasury stock at cost (786) (118) Less deferred compensation (182) (214) ---------------- ---------------- TOTAL STOCKHOLDERS' EQUITY 3,521 3,388 ---------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,729 $ 6,754 ================ ================
See notes to condensed financial statements.
SCHEDULE I (CONTINUED) Aon Corporation (PARENT COMPANY) CONDENSED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31 --------------------------------------- (MILLIONS) 2001 2000 1999 ----------- ----------- ----------- REVENUE Dividends from subsidiaries $ 333 $ 379 $ 467 Other investment income 1 9 20 ----------- ----------- ----------- TOTAL REVENUE 334 388 487 ----------- ----------- ----------- EXPENSES Operating and administrative 14 22 13 Interest - subsidiaries 93 103 96 Interest - other 107 122 85 ----------- ----------- ----------- TOTAL EXPENSES 214 247 194 ----------- ----------- ----------- INCOME BEFORE INCOME TAXES AND EQUITY (DEFICIT) IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 120 141 293 Income tax benefit 85 95 70 ----------- ----------- ----------- 205 236 363 EQUITY (DEFICIT) IN UNDISTRIBUTED INCOME OF SUBSIDIARIES (2) 238 (11) ----------- ----------- ----------- NET INCOME $ 203 $ 474 $ 352 =========== =========== ===========
See notes to condensed financial statements
SCHEDULE I (CONTINUED) Aon Corporation (PARENT COMPANY) CONDENSED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31 -------------------------------------------- (MILLIONS) 2001 2000 1999 ------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES $ 170 $ 137 $ 287 CASH FLOWS FROM INVESTING ACTIVITIES: Investments in subsidiaries (24) (124) (363) Other investments (20) - - Notes receivables from subsidiaries 60 (40) (208) ------------- ------------ ------------ CASH PROVIDED (USED) BY INVESTING ACTIVITIES 16 (164) (571) ------------- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Treasury stock transactions - net 49 (59) (66) Issuance (repayment) of short-term borrowings - net (599) 30 387 Issuance of notes payable and long-term debt 608 266 284 Repayment of long-term debt - - (100) Cash dividends to stockholders (241) (226) (210) ------------- ------------ ------------ CASH PROVIDED (USED) BY FINANCING ACTIVITIES (183) 11 295 ------------- ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3 (16) 11 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1 17 6 ------------- ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4 $ 1 $ 17 ============= ============ ============
See notes to condensed financial statements SCHEDULE I (CONTINUED) Aon Corporation (Parent Company) NOTES TO CONDENSED FINANCIAL STATEMENTS (1) See notes to consolidated financial statements incorporated by reference from the 2001 Annual Report. (2) Generally, the net assets of Aon's insurance subsidiaries available for transfer to the parent company are limited to the amounts that the insurance subsidiaries' statutory net assets exceed minimum statutory capital requirements; however, payments of the amounts as dividends in excess of $101 million may be subject to approval by regulatory authorities. (3) In 2001, Aon entered into a new committed bank credit facility under which certain European subsidiaries can borrow up to EUR 500 million. At December 31, 2001, loans of EUR 269 million ($239 million) were outstanding under this facility. An indirect wholly-owned subsidiary of Aon Corporation manages various investment portfolios, totaling $249 million at December 31, 2001, held in a collateral trust for the benefit of certain unaffiliated entities and is obligated to produce specified investment returns for those portfolios. Aon Corporation has unconditionally guaranteed the obligations of this subsidiary. (4) In 2001, the Condensed Statements of Cash Flows exclude the impact of certain non-cash transfers primarily related to notes receivable from subsidiaries and notes payable to subsidiaries. (5) During 2001, Aon Corporation (Parent Company) reclassified $520 million of notes receivable - subsidiaries to investments in subsidiaries related to its shared services operations.
SCHEDULE II AON CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2001, 2000 and 1999 (millions) ADDITIONS ------------------------------- CHARGED/ BALANCE AT CHARGED TO (CREDITED) BALANCE beginning COST AND TO OTHER DEDUCTIONS AT END Description of year EXPENSES ACCOUNTS (1) OF YEAR ------------------------------------------------------------- --------------- ------------- --------------- --------------- YEAR ENDED DECEMBER 31, 2001 ---------------------------- Allowance for doubtful accounts (2) (deducted from insurance brokerage and consulting receivables) $ 88 $ 30 $ (2) $ (23) $ 93 Allowance for doubtful accounts (deducted from premiums and other) 4 - - - 4 YEAR ENDED DECEMBER 31, 2000 ---------------------------- Allowance for doubtful accounts (2) (deducted from insurance brokerage and consulting receivables) $ 88 $ 19 $ (2) $ (17) $ 88 Allowance for doubtful accounts (deducted from premiums and other) 6 - - (2) 4 YEAR ENDED DECEMBER 31, 1999 ---------------------------- Allowance for doubtful accounts (2) (deducted from insurance brokerage and consulting receivables) 93 12 (3) (14) 88 Allowance for doubtful accounts (deducted from premiums and other) 6 1 - (1) 6 ----------------------------------------------------------------------------------------------------------------------------------- (1) Amounts deemed to be uncollectible. (2) Amounts shown in additions charged/(credited) to other accounts primarily represent reserves related to acquired business and foreign exchange.
SCHEDULE II.1 AON CORPORATION AND SUBSIDIARIES CONSOLIDATED SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES AS OF DECEMBER 31, 2001 AMOUNT SHOWN IN STATEMENT AMORTIZED FAIR OF FINANCIAL (millions) COST OR COST VALUE POSITION ---------------- ---------------- ------------------- FIXED MATURITIES - AVAILABLE FOR SALE: U.S. government and agencies $ 355 $ 361 $ 361 States and political subdivisions 3 3 3 Debt securities of foreign governments not classified as loans 515 521 521 Corporate securities 1,169 1,131 1,131 Public utilities 74 72 72 Mortgage-backed securities 42 42 42 Other fixed maturities 19 19 19 ---------------- ---------------- ------------------- TOTAL FIXED MATURITIES 2,177 2,149 2,149 ---------------- ---------------- ------------------- EQUITY SECURITIES - AVAILABLE FOR SALE: Common stocks: Banks, trusts and insurance companies 79 68 68 Industrial, miscellaneous and all other 60 53 53 Non-redeemable preferred stocks 286 261 261 ---------------- ---------------- ------------------- TOTAL EQUITY SECURITIES 425 382 382 ---------------- ---------------- ------------------- Mortgage loans on real estate 3 * 3 * Policy loans 51 * 51 * Other long-term investments 583 * 586 * Short-term investments 2,975 2,975 ---------------- ------------------- TOTAL INVESTMENTS $ 6,214 $ 6,146 ================ =================== * These investment categories are combined and are shown as other investments in the Consolidated Statements of Financial Position
SCHEDULE II.2 AON CORPORATION AND SUBSIDIARIES REINSURANCE YEAR ENDED DECEMBER 31, 2001 ------------------------------------------------------------------------------------- (millions) CEDED TO ASSUMED PERCENTAGE OF GROSS OTHER FROM OTHER AMOUNT AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET ------------------------------------------------------------------------------------- LIFE INSURANCE IN FORCE $ 20,265 $ 13,660 $ 11,189 $ 17,794 63% ============== ============== ============== ============== ================= PREMIUMS Life Insurance $ 198 $ 110 $ 76 $ 164 46% A&H Insurance 1,293 329 222 1,186 19% Specialty Property & Casualty 1,061 482 93 672 14% -------------- -------------- -------------- -------------- ----------------- TOTAL PREMIUMS $ 2,552 $ 921 $ 391 $ 2,022 19% ============== ============== ============== ============== ================= YEAR ENDED DECEMBER 31, 2000 ------------------------------------------------------------------------------------- (millions) CEDED TO ASSUMED PERCENTAGE OF GROSS OTHER FROM OTHER AMOUNT AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET ------------------------------------------------------------------------------------- LIFE INSURANCE IN FORCE $ 18,803 $ 9,442 $ 9,367 $ 18,728 50% ============== ============== ============== ============== ================= PREMIUMS Life Insurance $ 198 $ 156 $ 102 $ 144 71% A&H Insurance 1,209 309 189 1,089 17% Specialty Property & Casualty 965 380 88 673 13% -------------- -------------- -------------- -------------- ----------------- TOTAL PREMIUMS $ 2,372 $ 845 $ 379 $ 1,906 20% ============== ============== ============== ============== ================= YEAR ENDED DECEMBER 31, 1999 ------------------------------------------------------------------------------------- (millions) CEDED TO ASSUMED PERCENTAGE OF GROSS OTHER FROM OTHER AMOUNT AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET ------------------------------------------------------------------------------------- LIFE INSURANCE IN FORCE $ 14,444 $ 10,023 $ 3,050 $ 7,471 41% ============== ============== ============== ============== ================= PREMIUMS Life Insurance $ 227 $ 93 $ 2 $ 136 1% A&H Insurance 1,167 257 91 1,001 9% Specialty Property & Casualty 860 274 85 671 13% -------------- -------------- -------------- -------------- ----------------- TOTAL PREMIUMS $ 2,254 $ 624 $ 178 $ 1,808 10% ============== ============== ============== ============== =================
SCHEDULE II.3 AON CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INSURANCE INFORMATION (millions) FUTURE POLICY UNEARNED DEFERRED BENEFITS, PREMIUMS AND POLICY LOSSES, CLAIMS OTHER NET ACUISITION AND LOSS POLICYHOLDERS' PREMIUM INVESTMENT COSTS EXPENSES FUNDS(3) REVENUE INCOME(1) -------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 ---------------------------- Insurance brokerage and other services $ - $ - $ - $ - $ 156 Consulting - - - - 5 Insurance underwriting 704 1,963 3,027 2,022 223 Corporate and other - - - - (171) ---------- ----------- ---------- ----------- ----------- TOTAL $ 704 $ 1,963 $ 3,027 $ 2,022 $ 213 ========== =========== ========== =========== =========== YEAR ENDED DECEMBER 31, 2000 ---------------------------- Insurance brokerage and other services $ - $ - $ - $ - $ 186 Consulting - - - - 6 Insurance underwriting 656 1,855 3,122 1,906 245 Corporate and other - - - - 71 ---------- ----------- ---------- ----------- ----------- TOTAL $ 656 $ 1,855 $ 3,122 $ 1,906 $ 508 ========== =========== ========== =========== =========== YEAR ENDED DECEMBER 31, 1999 ---------------------------- Insurance brokerage and other services $ - $ - $ - $ - $ 159 Consulting - - - - 3 Insurance underwriting 636 1,769 3,337 1,808 251 Corporate and other - - - - 164 ---------- ----------- ---------- ----------- ---------- TOTAL $ 636 $ 1,769 $ 3,337 $ 1,808 $ 577 ========== =========== ========== =========== ========== (1) The above results reflect allocations of investment income and certain expense elements considered reasonable under the circumstances. Results include income (loss) on disposals of investments. (2) Net of reinsurance ceded. (3) 2000 and 1999 were restated to conform with the 2001 presentation.
AON CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INSURANCE INFORMATION (Continued) (millions) BENEFITS AMORTIZATION CLAIMS, LOSSES OF DEFERRED AND POLICY OTHER COMMISSIONS, SETTLEMENT ACQUISITION OPERATING PREMIUMS FEES AND OTHER ENPENSES COSTS EXPENSES WRITTEN(2) ------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 2001 ---------------------------- Insurance brokerage and other services $ 4,503 $ - $ - $ 4,135 $ - Consulting 933 - - 812 - Insurance underwriting 5 1,111 217 682 1,966 Corporate and other - - - 320 - ------------ ---------- ----------- ----------- ---------- TOTAL $ 5,441 $ 1,111 $ 217 $ 5,949 $ 1,966 ============ ========== =========== =========== ========== YEAR ENDED DECEMBER 31, 2000 ---------------------------- Insurance brokerage and other services $ 4,181 $ - $ - $ 3,677 $ - Consulting 764 - - 664 - Insurance underwriting 16 1,037 215 615 1,887 Corporate and other - - - 313 - ------------ ---------- ----------- ----------- ---------- TOTAL $ 4,961 $ 1,037 $ 215 $ 5,269 $ 1,887 ============ ========== =========== =========== ========== YEAR ENDED DECEMBER 31, 1999 ---------------------------- Insurance brokerage and other services $ 3,985 $ - $ - $ 3,651 $ - Consulting 653 - - 698 - Insurance underwriting 47 973 247 596 1,787 Corporate and other - - - 270 - ------------ ---------- ----------- ----------- ---------- TOTAL $ 4,685 $ 973 $ 247 $ 5,215 $ 1,787 ============ ========== =========== =========== ========== (1) The above results reflect allocations of investment income and certain expense elements considered reasonable under the circumstances. Results include income (loss) on disposals of investments. (2) Net of reinsurance ceded. (3) 2000 and 1999 were restated to conform with the 2001 presentation.
Cross Reference Sheet, Pursuant to General Instruction G(4)
ITEM IN FORM 10-K INCORPORATED BY REFERENCE TO ----------------- ---------------------------- Part I ------ Item 1. Business Annual Report to Stockholders of the Registrant for the Year 2001 ("Annual Report") pages 6 through 15, 23 through 27, and pages 43, 58, 59 and 63. Item 3. Legal Proceedings Annual Report page 57 (note 15 of Notes to Consolidated Financial Statements). Part II ------- Item 5. Market for the Registrant's Common Stock Annual Report pages 48 and 49 (note 11 of and Related Security Holder Matters Notes to Consolidated Financial Statements) and page 61 ("Dividends paid per share" and "Price range"). Item 6. Selected Financial Data Annual Report page 61. Item 7. Management's Discussion and Analysis of Annual Report pages 18 through 31. Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures Annual Report page 31 ("Market Risk Exposure"). about Market Risk Item 8. Financial Statements, Report by Independent Annual Report pages 32 through 60 and 62. Auditors and Supplementary Data Part III -------- Item 10. Directors and Executive Officers of the Proxy Statement For Annual Meeting of Stockholders Registrant on April 19, 2002 of the Registrant ("Proxy Statement") pages 3, 6, 7, 10 and 11. Item 11. Executive Compensation Proxy Statement pages 14 through 17. Item 12. Security Ownership of Certain Beneficial Proxy Statement pages 2, 8 and 9. Owners and Management Item 13. Certain Relationships and Related Proxy Statement pages 21 and 22 ("Transactions With Transaction Management"). Part IV ------- Item 14. Exhibits, Financial Statement Schedules, Annual Report pages 32 through 60 and 62. Reports on Form 8-K and Report by Independent Auditors
EXHIBIT INDEX Exhibit Number Page Number of Regulation Sequentially S-K, Item 601 Numbered Copy ------------- ------------- (3) Articles of incorporation and bylaws: (a) Second Restated Certificate of Incorporation of the Registrant - incorporated by reference to Exhibit 3(a) to the 1991 Form 10-K. (b) Certificate of Amendment of the Registrant's Second Restated Certificate of Incorporation - incorporated by reference to Exhibit 3 to the First Quarter 1994 Form 10-Q. (c) Certificate of Amendment of the Registrant's Second Restated Certificate of Incorporation - incorporated by reference to Exhibit 3 to the Registrant's current Form 8-K, dated May 9, 2000. (d) Amended Bylaws of the Registrant - incorporated by reference to Exhibit 3(d) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2000 (the "2000 Form 10-K"). (e) Certificate of Designation for the Registrant's Series C Cumulative Preferred Stock - incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated February 9, 1994. (4) Instruments defining the rights of security holders, including indentures: (a) Indenture dated September 15, 1992 between the Registrant and Continental Bank Corporation (now known as Bank of America Illinois), as Trustee - incorporated by reference to Exhibit 4(a) of the Registrant's Current Report on Form 8-K dated September 23, 1992. (b) Resolutions establishing terms of 7.40% Notes Due 2002 - incorporated by reference to Exhibit 4(d) to the 1992 Form 10-K. (c) Resolutions establishing the terms of 6.70% Notes Due 2003 incorporated by reference to Exhibit 4(c) to the 1993 Form 10-K. (d) Resolutions establishing the terms of 6.30% Notes Due 2004 incorporated by reference to Exhibit 4(d) to the 1993 Form 10-K. (e) Resolutions establishing the terms of 6.90% Notes due 2004 incorporated by reference to Exhibit 4(e) to the 1999 Form 10-K. (f) Resolutions establishing the terms of 8.65% Notes due 2005 - incorporated by reference to Exhibits 4(f) to the 2000 Form 10-K. (g) Indenture dated December 13, 2001, between the Registrant and the Bank of New York as Trustee (Floating Rate Notes due 2003). (h) Indenture dated December 13, 2001, between the Registrant and the Bank of New York as Trustee (6.2% Notes due 2007).
EXHIBIT INDEX Exhibit Number Page Number of Regulation Sequentially S-K, Item 601 Numbered Copy ------------- ------------- (i) Indenture dated December 31, 2001 between Private Equity Partnerships Structure I, LLC, as issuer and the Bank of New York as Trustee, Custodian, Calculation Agent, Note Registrar, Transfer Agent and Paying Agent. (j) Junior Subordinated Indenture dated as of January 13, 1997 between the Registrant and The Bank of New York, as trustee - incorporated by reference to Exhibit 4.1 of the Registrant's Amendment No. 1 to Registration Statement on Form S-4 No. 333-21237 dated March 27, 1997 (the "Capital Securities Registration"). (k) First Supplemental Indenture dated as of January 13, 1997 between the Registrant and the Bank of New York, as trustee - incorporated by reference to Exhibit 4.2 of the Capital Securities Registration. (l) Certificate of Trust of Aon Capital A - incorporated by reference to Exhibit 4.3 of the Capital Securities Registration. (m) Amended and Restated Trust Agreement of Aon Capital A dated as of January 13, 1997 among the Registrant, as Depositor, The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, the Administrative Trustees named therein and the holders, from time to time, of the Capital Securities - incorporated by reference to Exhibit 4.5 of the Capital Securities Registration. (n) Capital Securities Guarantee Agreement dated as of January 13, 1997 between the Registrant and the Bank of New York, as guarantee trustee - incorporated by reference to Exhibit 4.8 of the Capital Securities Registration. (o) Capital Securities Exchange and Registration Rights Agreement dated as of January 13, 1997 among the Registrant, Aon Capital A and Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. - incorporated by reference to Exhibit 4.10 of the Capital Securities Registration. (p) Debenture Exchange and Registration Rights Agreement dated as of January 13, 1997 among the Registrant, Aon Capital A and Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. - incorporated by reference to Exhibit 4.11 of the Capital Securities Registration. (q) Guarantee Exchange and Registration Rights Agreement dated as of January 13, 1997 among the Registrant, Aon Capital A and Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. - incorporated by reference to Exhibit 4.12 of the Capital Securities Registration.
EXHIBIT INDEX Exhibit Number Page Number of Regulation Sequentially S-K, Item 601 Numbered Copy ------------- ------------- (10) Material Contracts: (a) Aon Stock Option Plan (as amended and restated through February 2000) - incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarter June 30, 2000 (the "Second Quarter 2000 Form 10-Q"). (b) Aon Stock Option Plan (as amended and restated through 1997) - incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarter ended March 31, 1997 (the "First Quarter 1997 Form 10-Q"). (c) First Amendment to the Aon Stock Option Plan as Amended and Restated Through 1997 - incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarter ended March 31, 1999 (the "First Quarter 1999 Form 10-Q"). (d) Registration Rights Agreement by and among the Registrant and certain affiliates of Ryan Insurance Group, Inc. (Including Patrick G. Ryan and Andrew J. McKenna) - incorporated by reference to Exhibit (f) to the 1982 Form 10-K. (e) Aon Corporation Outside Director Deferred Compensation Agreement by and among Registrant and Registrant's directors who are not salaried employees of Registrant or Registrant's affiliates. (f) Aon Stock Award Plan (as amended and restated through 1997) - incorporated by reference to Exhibit 10(b) to the First Quarter 1997 Form 10-Q. (g) First Amendment to the Aon Stock Award Plan as Amended and Restated Through 1997 - incorporated by reference to exhibit 10(b) to the First Quarter 1999 Form 10-Q. (h) Amendment and Waiver Agreement dated as of November 4, 1991 among the Registrant and each of Patrick G. Ryan, Shirley Ryan, Ryan Enterprises Corporation and Harvey N. Medvin - incorporated by reference to Exhibit 10(j) to the 1991 Form 10-K. (i) Registration Rights Agreement dated November 2, 1992 by and between the Registrant and Frank B. Hall & Co., Inc. - incorporated by reference to Exhibit 4(c) to the Third Quarter 1992 Form 10-Q. (j) Aon Corporation 1994 Amended and Restated Outside Director Stock Award Plan - incorporated by reference to Exhibit 10(b) to the First Quarter 1994 Form 10-Q.
EXHIBIT INDEX Exhibit Number Page Number of Regulation Sequentially S-K, Item 601 Numbered Copy ------------- ------------- (k) Aon Corporation 1995 Senior Officer Incentive Compensation Plan - incorporated by reference to Exhibit 10(p) to the 1995 Form 10-K. (l) Aon Deferred Compensation Plan and First Amendment to the Aon Deferred Compensation Plan - incorporated by reference to Exhibit 10(q) to the 1995 Form 10-K. (m) 1999 Aon Deferred Compensation Plan incorporated by reference to Exhibit 10(1) of the 1999 Form 10-K. (n) Aon Severance Plan - incorporated by reference to Exhibit 10 to the Registrant's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarter ended June 30, 1997. (o) Asset Purchase Agreement dated July 24, 1992 between the Registrant and Frank B. Hall & Co. Inc. - incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1992. (p) Stock Purchase Agreement by and among the Registrant, Combined Insurance Company of America, Union Fidelity Life Insurance Company and General Electric Capital Corporation dated as of November 11, 1995 - incorporated by reference to Exhibit 10(s) of the 1995 Form 10-K. (q) Stock Purchase Agreement by and among the Registrant; Combined Insurance Company of America; The Life Insurance Company of Virginia; Forth Financial Resources, Ltd.; Newco Properties, Inc.; and General Electric Capital Corporation dated as of December 22, 1995 - incorporated by reference to Exhibit 10(t) to the 1995 Form 10-K. (r) Agreement and Plan of Merger among the Registrant, Purchaser and A&A dated as of December 11, 1996 - incorporated by reference to Exhibit (c)(1) to the Registrant's Schedule 14D-1 filed with the SEC on December 16, 1996. (s) First Amendment to Agreement and Plan of Merger dated as of January 7, 1997 among the Registrant, Purchaser and A&A - incorporated by reference to Exhibit (c)(3) to Schedule 14D-1 filed by the Registrant with the SEC on January 9, 1997. (t) Employment Agreement dated June 1, 1993 by and among the Registrant, Aon Risk Services, Inc. and Michael D. O'Halleran, incorporated by reference to Exhibit 10(p) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1998.
EXHIBIT INDEX Exhibit Number Page Number of Regulation Sequentially S-K, Item 601 Numbered Copy ------------- ------------- (u) Agreement and Plan of Merger dated July 16, 2001 among Aon Corporation, Ryan Holding Corporation of Illinois, Ryan Enterprises Corporation of Illinois, Holdco #1, Inc., Holdco #2, Inc., Patrick G. Ryan, Shirley W. Ryan and the stockholders of Ryan Holding Corporation of Illinois and of Ryan Enterprises Corporation of Illinois set forth on the signature pages thereto - incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the Quarter ended June 30, 2001 (the "Second Quarter 2001 Form 10-Q"). (v) Stock Restriction Agreement dated July 16, 2001 among Aon Corporation, Patrick G. Ryan, Shirley W. Ryan, Patrick G. Ryan Jr., Robert J.W. Ryan, the Corbett M.W. Ryan Living Trust dated July 13, 2001, the Patrick G. Ryan Living Trust dated July 10, 2001, the Shirley W. Ryan Living Trust dated July 10, 2001, the 2001 Ryan Annuity Trust dated April 20, 2001 and the Family GST Trust under the PGR 2000 Trust dated November 22, 2000 - incorporated by reference to Exhibit 10.2 to the Second Quarter 2001 Form 10-Q. (w) Escrow Agreement dated July 16, 2001 among Aon Corporation, Patrick G. Ryan, Shirley W. Ryan, Patrick G. Ryan, Jr., Robert J.W. Ryan, the Corbett M. W. Ryan Living Trust dated July 13, 2001, the Patrick G. Ryan Living Trust dated July 10, 2001, the Shirley W. Ryan Living Trust dated July 10, 2001, the 2001 Ryan Annuity Trust dated April 20, 2001 and the Family GST Trust under the PGR 2000 Trust dated November 22, 2000 and American National Bank and Trust Company of Chicago, as escrow agent - incorporated by reference to Exhibit 10.3 to the Second Quarter 2001 Form 10-Q. (12) Statements regarding Computation of Ratios. (a) Statement regarding Computation of Ratio of Earnings to Fixed Charges. (b) Statement regarding Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. (13) Annual Report to Stockholders of the Registrant for the year ended December 31, 2001. (21) List of subsidiaries of the Registrant. (23) Consent of Ernst & Young LLP to the incorporation by reference into Aon's Annual Report on Form 10-K of their report included in the 2001 Annual Report to Stockholders and into Aon's Registration Statement Nos. 33-27984, 33-42575, 33-59037, 333-21237, 333-50607, 333-55773, 333-78723, 333-49300, 333-57706, 333-65624 and 333-74364.
EXHIBIT INDEX Exhibit Number Page Number of Regulation Sequentially S-K, Item 601 Numbered Copy ------------- ------------- (99) Annual Report to the Securities and Exchange Commission on Form 11-K for the Aon Savings Plan for the year ended December 31, 2001 - to be filed by amendment as provided in Rule 15d-21(b).