-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IDGhYE1bgPRM33EnKPSD5uh2YolMJfRArnT5Gs8PseuXEAKde+u8izl6524Ttd5w jGQnBc5/oBId6MOXlYJRtg== 0001104659-09-061311.txt : 20091030 0001104659-09-061311.hdr.sgml : 20091030 20091030063446 ACCESSION NUMBER: 0001104659-09-061311 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20091030 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20091030 DATE AS OF CHANGE: 20091030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AON CORP CENTRAL INDEX KEY: 0000315293 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 363051915 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07933 FILM NUMBER: 091146010 BUSINESS ADDRESS: STREET 1: 200 EAST RANDOLPH STREET CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3123811000 MAIL ADDRESS: STREET 1: 200 EAST RANDOLPH STREET CITY: CHICAGO STATE: IL ZIP: 60601 FORMER COMPANY: FORMER CONFORMED NAME: COMBINED INTERNATIONAL CORP DATE OF NAME CHANGE: 19870504 8-K 1 a09-32366_18k.htm 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): October 30, 2009

 

 

Aon Corporation

(Exact Name of Registrant as Specified in Charter)

 

Delaware

 

1-7933

 

36-3051915

(State or Other Jurisdiction
of Incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

 

200 East Randolph Street, Chicago, Illinois
(Address of Principal Executive Offices)

 

60601
(Zip Code)

 

Registrant’s telephone number, including area code: (312) 381-1000

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

Item 2.02.              Results of Operations and Financial Condition.

 

On October 30, 2009, Aon Corporation (the “Company”) issued a press release (the “Press Release”) announcing its results of operations for the quarter and nine months ended September 30, 2009.

 

A copy of the Press Release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Item 9.01.              Financial Statements and Exhibits.

 

(a) - (c)   Not applicable.

 

(d)           Exhibits:

 

Exhibit
Number

 

Description of
Exhibit

99.1

 

Press Release issued by the Company on October 30, 2009.

 

2


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Aon Corporation

 

 

 

By:

/s/ Christa Davies 

 

 

Christa Davies

 

 

Executive Vice President and Chief Financial Officer

 

 

 

Date: October 30, 2009

 

 

 

3


 

EXHIBIT INDEX

 

Exhibit
Number

 

Description of
Exhibit

99.1

 

Press Release issued by the Company on October 30, 2009.

 

4

 EX-99.1 2 a09-32366_1ex99d1.htm EX-99.1

Exhibit 99.1

 

Investor Relations           

 

News from Aon

 

Aon Reports Third Quarter 2009 Results

 

·   Total Revenue was $1.8 billion and EPS from Continuing Operations was $0.40

 

Third Quarter Summary

·                  EPS from continuing operations, excluding certain items, decreased 6% to $0.65

·                  Brokerage revenue was $1.5 billion with a decline in organic revenue of 3%

·                  Brokerage pretax margin was 12.6% and the adjusted pretax margin, excluding certain items, increased 140 basis points to 18.4%

·                  Consulting revenue was $308 million with a decline in organic revenue of 5%

·                  Consulting pretax margin was 10.7% and the adjusted pretax margin, excluding certain items, decreased 10 basis points to 15.6%

·                  Repurchased 3.0 million shares of common stock for $125 million

·                  Increased estimated annualized savings related to the 2007 restructuring program by $97 million to $467 million, and costs necessary to achieve savings by $150 million to $700 million

·                  Accelerated estimated savings targets for 2009 and 2010 under the Aon Benfield restructuring program, while decreasing total costs necessary to achieve savings by $30 million to $155 million

 

CHICAGO, IL — October 30, 2009 - Aon Corporation (NYSE: AOC) today reported results for the third quarter ended September 30, 2009.

 

Net income attributable to Aon stockholders was $120 million or $0.41 per share, compared to $117 million or $0.40 per share for the prior year quarter.  Net income attributable to Aon stockholders from continuing operations decreased 25% to $117 million or $0.40 per share, compared to $155 million or $0.53 per share for the prior year quarter.  Net income attributable to Aon stockholders from continuing operations per share, excluding certain items, decreased 6% to $0.65 compared to $0.69 for the prior year quarter, including a $62 million or 69% decline in investment income.  Certain items that impacted third quarter results and comparisons with the prior year quarter are detailed in the reconciliation of non-GAAP measures on page 12 of this press release.

 

“Our third quarter results reflect solid operational discipline, as highlighted by a 140 basis point adjusted pretax margin improvement in our Brokerage segment, despite difficult economic and industry conditions and a 69 percent decline in total investment income,” said Greg Case, president and chief executive officer.  “We continue to make substantial investments across our businesses with the rollout of our Global Risk Insight Platform and the introduction of Inpoint, our insurance carrier consulting business, as well as the addition of key talent in Consulting.  As we invest in future growth opportunities, our 2007 and Aon Benfield restructuring programs will

 


 

continue to deliver additional cost savings as we have achieved less than 40 percent thus far, of the total $589 million of estimated annual savings under these two programs.  Lastly, our balance sheet and strong cash flow provide significant financial flexibility to create shareholder value, as highlighted by the repurchase of an additional $125 million of stock during the quarter.”

 

THIRD QUARTER FINANCIAL SUMMARY

Total revenue decreased 2% to $1.8 billion due to a 5% decline resulting from foreign currency translation and a 69% decline in investment income, partially offset by a 9% increase from acquisitions, primarily Benfield, net of dispositions.

 

Total operating expenses were similar to the prior year quarter at $1.6 billion, including an $82 million favorable impact from foreign currency translation, partially offset by a $45 million increase in restructuring charges and operating expenses from the Benfield merger.

 

Restructuring expenses related to the 2007 and Aon Benfield restructuring programs were $99 million in the third quarter compared to $54 million in the prior year quarter.  An analysis of restructuring-related expenses by segment and type for both the 2007 and Aon Benfield restructuring programs are detailed on page 13 of this release.

 

Restructuring savings in the third quarter related to the 2007 restructuring program are estimated at $68 million compared to $29 million in the prior year quarter.  Of the estimated restructuring savings in the third quarter, $57 million were related to the Brokerage segment primarily for workforce reduction.  Before any potential reinvestment of savings, the 2007 restructuring program is now expected to deliver cumulative cost savings of approximately $240-245 million in 2009 and $467 million of annualized run-rate cost savings by the end of 2010, primarily as a result of additional cost savings opportunities to streamline support functions globally.

 

Restructuring savings in the third quarter related to the Aon Benfield restructuring program are estimated at $14 million.  Before any potential reinvestment of savings, the Benfield restructuring program is now expected to deliver cumulative cost savings of $45-50 million in 2009, $90-100 million in 2010 and $122 million in 2011.

 

Currency fluctuations in the third quarter negatively impacted income from continuing operations by $0.01 per diluted share when the Company translates prior year quarter results at current quarter foreign exchange rates.

 

Effective tax rate on continuing operations was 26.7% for the third quarter compared to 27.1% for the prior year quarter.  The rate in the third quarter includes an underlying tax rate on operations of 28.0%.

 

Average diluted shares outstanding decreased to 292.1 million in the third quarter compared to 293.9 million in the prior year quarter.  As a result of accounting guidance introduced in the first quarter, share-based payment awards which receive non-forfeitable dividends are now included in the calculation of basic and diluted shares outstanding.  Average diluted shares outstanding increased by approximately 3.4 million in the third quarter and 3.6 million in the prior year quarter as a result of these share-based awards being included in the calculation of diluted earnings per share.

 

2


 

During the quarter, the Company repurchased 3.0 million shares of common stock for $125 million.  As of September 30, the Company had approximately $605 million of remaining share repurchase authorization.

 

Discontinued Operations after-tax income was $3 million or $0.01 per share compared to an after-tax loss of $38 million or $0.13 per share for the prior year quarter.  Discontinued operations include adjustments to the gains and losses of previously sold companies.  The prior year quarter includes the results of Automobile Insurance Specialists (AIS) and post-close adjustments related to the sale of Combined Insurance Companies of America (CICA) and Sterling Life Insurance (Sterling).

 

THIRD QUARTER SEGMENT REVIEW

Certain noteworthy items impacted pretax income and pretax margins in the third quarter of 2009 and 2008.  The third quarter segment reviews provided below include supplemental information related to adjusted pretax income and pretax margin which is described in detail on the “Reconciliation of the Impact of Non-GAAP Measures on Segments and Diluted Earnings Per Share” on page 12 of this press release.

 

RISK AND INSURANCE BROKERAGE SERVICES

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

(millions)

 

Third Quarter Ended

 

 

 

Less:

 

Acquisitions,

 

Organic

 

Commissions,

 

Sep 30,

 

Sep 30,

 

%

 

Currency

 

Divestitures,

 

Revenue

 

Fees and Other

 

2009

 

2008

 

Change

 

Impact

 

Other

 

Growth

 

Americas

 

$

541

 

$

557

 

(3

)%

(2

)%

—

%

(1

)%

U.K.

 

167

 

182

 

(8

)

(9

)

5

 

(4

)

EMEA

 

273

 

314

 

(13

)

(7

)

(1

)

(5

)

Asia Pacific

 

111

 

120

 

(8

)

(5

)

(2

)

(1

)

Reinsurance

 

379

 

252

 

50

 

(4

)

58

 

(4

)

Subtotal

 

$

1,471

 

$

1,425

 

3

%

(5

)%

11

%

(3

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income

 

18

 

48

 

(63

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

$

1,489

 

$

1,473

 

1

%

 

 

 

 

 

 

 

Risk and Insurance Brokerage Services total revenue increased 1% to $1.5 billion compared to the prior year quarter due to an 11% increase from acquisitions, primarily Benfield, net of dispositions, partially offset by a 5% unfavorable impact from foreign currency translation on commissions and fees and a 63% decline in investment income.  Americas organic revenue decreased 1% due primarily to weak economic conditions and a soft market in both U.S. Retail and Canada, partially offset by strong growth in Latin America.  U.K. organic revenue decreased 4% due primarily to weak economic conditions and lower new business.  EMEA organic revenue decreased 5% as weak economic conditions in continental Europe offset growth in certain emerging markets.  Asia Pacific organic revenue decreased 1% reflecting the impact of exiting certain businesses in Japan, partially offset by modest growth in New Zealand and certain emerging markets.  Reinsurance organic revenue decreased 4% due primarily to higher cedent retentions in treaty business, partially offset by new business growth globally in treaty placements.

 

3


 

 

 

Third Quarter Ended

 

 

 

 

 

Sept 30,

 

Sept 30,

 

%

 

(millions)

 

2009

 

2008

 

Change

 

Revenue

 

$

1,489

 

$

1,473

 

1

%

Expenses

 

 

 

 

 

 

 

Compensation and benefits

 

909

 

910

 

—

 

Other expenses

 

393

 

380

 

3

 

Total operating expenses

 

1,302

 

1,290

 

1

 

Operating income

 

$

187

 

$

183

 

2

%

Other (income) expense

 

(1

)

(9

)

(89

)

Pretax income

 

$

188

 

$

192

 

(2

)%

Pretax margin

 

12.6

%

13.0

%

 

 

 

 

 

 

 

 

 

 

Pretax income - adjusted

 

$

274

 

$

251

 

9

%

Pretax margin - adjusted

 

18.4

%

17.0

%

 

 

 

Compensation and benefits for the third quarter was similar to the prior year quarter including a $48 million favorable impact from foreign currency translation, benefits related to the restructuring programs and lower discretionary incentive compensation, primarily offset by increased operating expenses from the Benfield merger and a $7 million increase in restructuring related costs.  Other expenses for the third quarter increased $13 million from the prior year quarter due primarily to a $24 million increase in restructuring related costs, the inclusion of Benfield operating expenses and an $11 million increase in intangible amortization expense related to the merger with Benfield, partially offset by a $18 million favorable impact from foreign currency translation.

 

Third quarter pretax income decreased 2% to $188 million.  Adjusting for certain items detailed on page 12 of this press release, pretax income increased 9% or $23 million to $274 million and pretax margin increased 140 basis points to 18.4% versus the prior year quarter due primarily to benefits of the restructuring programs, lower discretionary incentive compensation and the inclusion of pretax income from the merger with Benfield, partially offset by a $30 million decrease in investment income and higher intangible amortization expenses.

 

CONSULTING

 

(millions)

 

Third Quarter Ended

 

 

 

Less:

 

Less:
Acquisitions,

 

Organic

 

Commissions,

 

Sept 30,

 

Sept 30,

 

%

 

Currency

 

Divestitures,

 

Revenue

 

Fees and Other

 

2009

 

2008

 

Change

 

Impact

 

Other

 

Growth

 

Services

 

$

262

 

$

284

 

(8

)%

(4

)%

1

%

(5

)%

Outsourcing

 

46

 

51

 

(10

)

(6

)

1

 

(5

)

Subtotal

 

$

308

 

$

335

 

(8

)%

(4

)%

1

%

(5

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income

 

—

 

2

 

(100

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

$

308

 

$

337

 

(9

)%

 

 

 

 

 

 

 

Consulting total revenue decreased 9% to $308 million compared to the prior year quarter due primarily to a 5% decline in organic commissions and fees revenue and a 4% unfavorable impact from foreign currency translation.  Organic revenue in Consulting Services decreased 5%

 

4


 

primarily reflecting a decline in compensation and human capital consulting.  Organic revenue in Outsourcing declined 5% as a previously announced outsourcing contract winds down.

 

 

 

Third Quarter Ended

 

 

 

 

 

Sept 30,

 

Sept 30,

 

%

 

(millions)

 

2009

 

2008

 

Change

 

Revenue

 

$

308

 

$

337

 

(9

)%

Expenses

 

 

 

 

 

 

 

Compensation and benefits

 

198

 

206

 

(4

)

Other expenses

 

77

 

79

 

(3

)

Total operating expenses

 

275

 

285

 

(4

)

Operating income

 

$

33

 

$

52

 

(37

)%

Other (income) expense

 

—

 

—

 

N/A

 

Pretax income

 

$

33

 

$

52

 

(37

)%

Pretax margin

 

10.7

%

15.4

%

 

 

 

 

 

 

 

 

 

 

Pretax income - adjusted

 

$

48

 

$

53

 

(9

)%

Pretax margin - adjusted

 

15.6

%

15.7

%

 

 

 

Compensation and benefits for the third quarter decreased 4% or $8 million from the prior year quarter including a $9 million favorable impact from foreign currency translation, benefits related to the 2007 restructuring program and lower discretionary incentive compensation, partially offset by a $7 million increase in restructuring related costs.  Other expenses decreased 3% or $2 million compared to the prior year quarter due to a $3 million favorable impact from foreign currency translation.

 

Third quarter pretax income decreased 37% to $33 million.  Adjusting for certain items detailed on page 12 of this press release, pretax income decreased 9% or $5 million to $48 million and pretax margin decreased 10 basis points to 15.6% versus the prior year quarter as lower organic revenue was partially offset by benefits related to the 2007 restructuring program and lower discretionary incentive compensation.

 

UNALLOCATED INCOME AND EXPENSE

 

 

 

Third Quarter Ended

 

 

 

 

 

Sept 30,

 

Sept 30,

 

%

 

(millions)

 

2009

 

2008

 

Change

 

Operating segment income before tax

 

$

221

 

$

244

 

(9

)%

Unallocated investment income & other revenue

 

19

 

40

 

(53

)

Unallocated expenses

 

(30

)

(34

)

(12

)

Interest expense

 

(32

)

(32

)

—

 

Income from continuing operations before tax

 

$

178

 

$

218

 

(18

)%

 

Unallocated investment income and other revenue for the third quarter decreased $21 million to $19 million compared to the prior year quarter due primarily to a $27 million decline in certain private equity distributions, partially offset by $10 million of revenue related to the

 

5


 

Company’s equity ownership in certain insurance investment funds.  Unallocated expenses decreased $4 million to $30 million.  The third quarter included $3 million of expense related to the Company’s equity ownership in certain insurance investment funds.  The prior year quarter included $6 million of costs related to the Benfield merger.  Interest expense was similar to the prior year quarter at $32 million.

 

Conference Call and Webcast Details

The Company will host a conference call on Friday, October 30, 2009 at 7:30 a.m. central time.  Interested parties can listen to the conference call via a live audio webcast at www.aon.com.

 

About Aon

Aon Corporation (NYSE: AOC - News) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its more than 37,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon’s industry-leading global resources and technical expertise are delivered locally through more than 500 offices in more than 120 countries. Named the world’s best broker by Euromoney magazine’s 2008 and 2009 Insurance Survey, Aon also ranked highest on Business Insurance’s listing of the world’s largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007, 2008, and 2009, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007 and 2008 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com.

 

Safe Harbor Statement

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, the outcome of inquiries from regulators and investigations related to compliance with the U.S. Foreign Corrupt Practices Act and non-U.S. anti-corruption laws, the impact of investigations brought by U.S. state attorneys general, U.S. state insurance regulators, U.S. federal prosecutors, U.S. federal regulators, and regulatory authorities in the U.K. and other countries, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, our ability to integrate Benfield successfully and to realize the anticipated benefits of the Benfield merger.  Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.

 

This press release includes supplemental information related to organic revenue growth and several additional measures including expenses, margins and income per share, that exclude the effects of restructuring charges and certain other noteworthy items that affected results for the comparable periods.  Organic revenue growth excludes from reported revenues the impact of foreign exchange, acquisitions, divestitures, transfers between business units, investment income, reimbursable expenses and unusual items.  The impact of foreign exchange is determined by translating last year’s revenue, expense or net income at this year’s foreign exchange rates.  Reconciliation is provided in the attached schedules.  Supplemental organic revenue growth information and additional measures that exclude the effects of the restructuring charges and certain other items do not affect net income or any other GAAP reported amounts.  Management believes that these measures are important to make meaningful period-to-period comparisons and that this supplemental information is helpful to investors.  They should be viewed in addition to, not in lieu of, the Company’s Consolidated Summary of Operations.  Industry peers provide similar supplemental information regarding their performance, although they may not make identical adjustments.

 

6


 

 

#

 

 

Investor Contact:

Media Contact:

Scott Malchow

David Prosperi

Vice President, Investor Relations

Vice President, Global Public Relations

312-381-3983

312-381-2485

 

7


 

Aon Corporation

Consolidated Summary of Operations (Unaudited)

 

 

 

Third Quarter Ended

 

Nine Months Ended

 

(millions except per share data)

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions, fees and other

 

$

1,780

 

$

1,756

 

1

%

$

5,466

 

$

5,493

 

—

%

Investment income

 

28

 

90

 

(69

)

81

 

214

 

(62

)

Total revenue

 

1,808

 

1,846

 

(2

)

5,547

 

5,707

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

1,119

 

1,131

 

(1

)

3,267

 

3,428

 

(5

)

Other general expenses

 

424

 

419

 

1

 

1,287

 

1,333

 

(3

)

Depreciation and amortization

 

56

 

49

 

14

 

174

 

157

 

11

 

Total operating expenses

 

1,599

 

1,599

 

—

 

4,728

 

4,918

 

(4

)

Operating income

 

209

 

247

 

(15

)

819

 

789

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

32

 

32

 

—

 

87

 

96

 

(9

)

Other (income) expense

 

(1

)

(3

)

(67

)

1

 

(9

)

N/A

 

Income from continuing operations before provision for income tax

 

178

 

218

 

(18

)

731

 

702

 

4

 

Provision for income tax (1)

 

47

 

59

 

(20

)

212

 

192

 

10

 

Income from continuing operations

 

131

 

159

 

(18

)

519

 

510

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

—

 

(57

)

N/A

 

93

 

1,440

 

(94

)

Provision for (benefit from) income tax (2)

 

(3

)

(19

)

(84

)

38

 

470

 

(92

)

Income (loss) from discontinued operations

 

3

 

(38

)

N/A

 

55

 

970

 

(94

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

134

 

121

 

11

 

574

 

1,480

 

(61

)

Less: Net income attributable to the noncontrolling interests

 

14

 

4

 

250

 

25

 

12

 

108

 

Net income attributable to Aon stockholders

 

$

120

 

$

117

 

3

%

$

549

 

$

1,468

 

(63

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Aon stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

117

 

$

155

 

(25

)%

$

494

 

$

498

 

(1

)%

Income (loss) from discontinued operations

 

3

 

(38

)

N/A

 

55

 

970

 

(94

)

Net income

 

$

120

 

$

117

 

3

%

$

549

 

$

1,468

 

(63

)%

Basic net income per share attributable to Aon stockholders (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.41

 

$

0.55

 

(25

)%

$

1.74

 

$

1.68

 

4

%

Income (loss) from discontinued operations

 

0.01

 

(0.13

)

N/A

 

0.19

 

3.26

 

(94

)

Net income

 

$

0.42

 

$

0.42

 

—

%

$

1.93

 

$

4.94

 

(61

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share attributable to Aon stockholders (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.40

 

$

0.53

 

(25

)%

$

1.69

 

$

1.61

 

5

%

Income (loss) from discontinued operations

 

0.01

 

(0.13

)

N/A

 

0.19

 

3.14

 

(94

)

Net income

 

$

0.41

 

$

0.40

 

3

%

$

1.88

 

$

4.75

 

(60

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

292.1

 

293.9

 

(1

)%

292.2

 

308.9

 

(5

)%

 

(1)

 

Tax rate for continuing operations is 26.7% and 27.1% for the third quarters ended September 30, 2009 and 2008, respectively, and 29.1% and 27.4% for the nine months ended September 30, 2009 and 2008, respectively. The underlying tax rate on continuing operations for 2009 is approximately 28%.

 

 

 

(2)

 

Tax rate for discontinued operations is not meaningful and 33.3% for the third quarters ended September 30, 2009 and 2008, respectively, and 40.9% and 32.6% for the nine months ended September 30, 2009 and 2008, respectively.

 

 

 

(3)

 

The basic and diluted earnings per share calculation was performed using the two-class method and included the impact of certain unvested share-based payment awards that have the right to receive nonforfeitable dividends.

 

8


 

Aon Corporation

 

Revenue from Continuing Operations (Unaudited)

 

 

 

Third Quarter Ended

 

(millions)

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Less:
Currency
Impact (1)

 

Less:
Acquisitions,
Divestitures &
Other

 

Organic
Revenue
Growth (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions, Fees and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk and Insurance Brokerage Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

541

 

$

557

 

(3

)%

(2

)%

—

%

(1

)%

United Kingdom

 

167

 

182

 

(8

)

(9

)

5

 

(4

)

Europe, Middle East & Africa

 

273

 

314

 

(13

)

(7

)

(1

)

(5

)

Asia Pacific

 

111

 

120

 

(8

)

(5

)

(2

)

(1

)

Reinsurance brokerage and related services

 

379

 

252

 

50

 

(4

)

58

 

(4

)

Total Risk and Insurance Brokerage Services

 

1,471

 

1,425

 

3

 

(5

)

11

 

(3

)

Consulting:

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting services

 

262

 

284

 

(8

)

(4

)

1

 

(5

)

Outsourcing

 

46

 

51

 

(10

)

(6

)

1

 

(5

)

Total Consulting

 

308

 

335

 

(8

)

(4

)

1

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Segments

 

$

1,779

 

$

1,760

 

1

%

(5

)%

9

%

(3

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk and Insurance Brokerage Services

 

$

18

 

$

48

 

(63

)%

 

 

 

 

 

 

Consulting

 

—

 

2

 

(100

)

 

 

 

 

 

 

Unallocated

 

10

 

40

 

(75

)

 

 

 

 

 

 

Total

 

$

28

 

$

90

 

(69

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk and Insurance Brokerage Services

 

$

1,489

 

$

1,473

 

1

%

 

 

 

 

 

 

Consulting

 

308

 

337

 

(9

)

 

 

 

 

 

 

Unallocated and Other

 

19

 

40

 

(53

)

 

 

 

 

 

 

Intersegment

 

(8

)

(4

)

100

 

 

 

 

 

 

 

Total

 

$

1,808

 

$

1,846

 

(2

)%

 

 

 

 

 

 

 

(1)

 

Currency impact is determined by translating last year’s revenue at this year’s foreign exchange rates.

 

 

 

(2)

 

Organic revenue growth excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items.

 

9


 

Aon Corporation

 

Revenue from Continuing Operations (Unaudited)

 

 

 

Nine Months Ended

 

(millions)

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Less:
Currency
Impact (1)

 

Less:
Acquisitions,
Divestitures &
Other

 

Organic
Revenue
Growth (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions, Fees and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk and Insurance Brokerage Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

1,592

 

$

1,638

 

(3

)%

(4

)%

—

%

1

%

United Kingdom

 

464

 

546

 

(15

)

(14

)

4

 

(5

)

Europe, Middle East & Africa

 

1,030

 

1,188

 

(13

)

(11

)

—

 

(2

)

Asia Pacific

 

318

 

373

 

(15

)

(12

)

(2

)

(1

)

Reinsurance brokerage and related services

 

1,146

 

756

 

52

 

(6

)

58

 

—

 

Total Risk and Insurance Brokerage Services

 

4,550

 

4,501

 

1

 

(8

)

10

 

(1

)

Consulting:

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting services

 

776

 

850

 

(9

)

(8

)

—

 

(1

)

Outsourcing

 

140

 

162

 

(14

)

(10

)

—

 

(4

)

Total Consulting

 

916

 

1,012

 

(9

)

(8

)

1

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Segments

 

$

5,466

 

$

5,513

 

(1

)%

(8

)%

8

%

(1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk and Insurance Brokerage Services

 

$

67

 

$

148

 

(55

)%

 

 

 

 

 

 

Consulting

 

1

 

4

 

(75

)

 

 

 

 

 

 

Unallocated

 

13

 

62

 

(79

)

 

 

 

 

 

 

Total

 

$

81

 

$

214

 

(62

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk and Insurance Brokerage Services

 

$

4,617

 

$

4,649

 

(1

)%

 

 

 

 

 

 

Consulting

 

917

 

1,016

 

(10

)

 

 

 

 

 

 

Unallocated and Other

 

33

 

62

 

(47

)

 

 

 

 

 

 

Intersegment

 

(20

)

(20

)

—

 

 

 

 

 

 

 

Total

 

$

5,547

 

$

5,707

 

(3

)%

 

 

 

 

 

 

 

(1)

Currency impact is determined by translating last year’s revenue at this year’s foreign exchange rates.

 

 

(2)

Organic revenue growth excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items.

 

10


 

Aon Corporation - Segments (Unaudited)

Risk and Insurance Brokerage Services  — Continuing Operations

 

 

 

Third Quarter Ended

 

Nine Months Ended

 

(millions)

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions, fees and other

 

$

1,471

 

$

1,425

 

3

%

$

4,550

 

$

4,501

 

1

%

Investment income

 

18

 

48

 

(63

)

67

 

148

 

(55

)

Total revenue

 

1,489

 

1,473

 

1

 

4,617

 

4,649

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

909

 

910

 

—

 

2,678

 

2,773

 

(3

)

Other general expenses

 

393

 

380

 

3

 

1,207

 

1,221

 

(1

)

Total operating expenses

 

1,302

 

1,290

 

1

 

3,885

 

3,994

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

187

 

183

 

2

 

732

 

655

 

12

 

Other expense (income)

 

(1

)

(9

)

(89

)

6

 

(14

)

N/A

 

Income before provision for income tax

 

$

188

 

$

192

 

(2

)%

$

726

 

$

669

 

9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income margin

 

12.6

%

13.0

%

 

 

15.7

%

14.4

%

 

 

 

Consulting - Continuing Operations

 

 

 

Third Quarter Ended

 

Nine Months Ended

 

(millions)

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions, fees and other

 

$

308

 

$

335

 

(8

)%

$

916

 

$

1,012

 

(9

)%

Investment income

 

—

 

2

 

(100

)

1

 

4

 

(75

)

Total revenue

 

308

 

337

 

(9

)

917

 

1,016

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

198

 

206

 

(4

)

544

 

612

 

(11

)

Other general expenses

 

77

 

79

 

(3

)

229

 

247

 

(7

)

Total operating expenses

 

275

 

285

 

(4

)

773

 

859

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

33

 

52

 

(37

)

144

 

157

 

(8

)

Other expense (income)

 

—

 

—

 

—

 

—

 

(1

)

(100

)

Income before provision for income tax

 

$

33

 

$

52

 

(37

)%

$

144

 

$

158

 

(9

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income margin

 

10.7

%

15.4

%

 

 

15.7

%

15.6

%

 

 

 

Reconciliation of segment income before provision for income tax to income from continuing operations before provision for income tax:

 

 

 

Third Quarter Ended

 

Nine Months Ended

 

(millions)

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Sept. 30,
2009

 

Sept. 30,
2008

 

Percent
Change

 

Segment income before provision for income tax

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk and Insurance Brokerage Services

 

$

188

 

$

192

 

(2

)%

$

726

 

$

669

 

9

%

Consulting

 

33

 

52

 

(37

)

144

 

158

 

(9

)

Total segment income before provision for income tax

 

221

 

244

 

(9

)

870

 

827

 

5

 

Unallocated investment income and other revenue

 

19

 

40

 

(53

)

33

 

62

 

(47

)

Unallocated expenses

 

(30

)

(34

)

(12

)

(85

)

(91

)

(7

)

Interest expense

 

(32

)

(32

)

—

 

(87

)

(96

)

(9

)

Income from continuing operations before provision for income tax

 

$

178

 

$

218

 

(18

)%

$

731

 

$

702

 

4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income margin

 

9.8

%

11.8

%

 

 

13.2

%

12.3

%

 

 

 

11


 

Aon Corporation

Reconciliation of the Impact of Non-GAAP Measures on Segments and Diluted Earnings Per Share (Unaudited) (1)

 

 

 

Third Quarter Ended September 30, 2009

 

Nine Months Ended September 30, 2009

 

(millions except per share data)

 

Risk and
Insurance
Brokerage
Services

 

Consulting

 

Unallocated
Income &
Expense

 

Total

 

Risk and
Insurance
Brokerage
Services

 

Consulting

 

Unallocated
Income &
Expense

 

Total

 

Revenue as reported

 

$

1,489

 

$

308

 

$

11

 

$

1,808

 

$

4,617

 

$

917

 

$

13

 

$

5,547

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before provision for income tax - as reported

 

$

188

 

$

33

 

$

(43

)

$

178

 

$

726

 

$

144

 

$

(139

)

$

731

 

Restructuring charges (Aon Benfield and 2007 plan)

 

84

 

15

 

—

 

99

 

216

 

21

 

—

 

237

 

Pension curtailment

 

—

 

—

 

—

 

—

 

(54

)

(20

)

(4

)

(78

)

Anti-bribery and compliance initiatives

 

1

 

—

 

—

 

1

 

3

 

—

 

—

 

3

 

Benfield integration costs

 

1

 

—

 

—

 

1

 

13

 

—

 

—

 

13

 

Income (loss) from continuing operations before provision for income tax - as adjusted

 

$

274

 

$

48

 

$

(43

)

279

 

$

904

 

$

145

 

$

(143

)

906

 

Provision for income taxes (2)

 

 

 

 

 

 

 

75

 

 

 

 

 

 

 

251

 

Income from continuing operations - as adjusted

 

 

 

 

 

 

 

204

 

 

 

 

 

 

 

655

 

Less: Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

25

 

Income from continuing operations - as adjusted

 

 

 

 

 

 

 

$

190

 

 

 

 

 

 

 

$

630

 

Diluted earnings per share from continuing operations - as adjusted

 

 

 

 

 

 

 

$

0.65

 

 

 

 

 

 

 

$

2.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

 

 

 

 

 

292.1

 

 

 

 

 

 

 

292.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income margins - as adjusted

 

18.4

%

15.6

%

N/A

 

15.4

%

19.6

%

15.8

%

N/A

 

16.3

%

 

 

 

Third Quarter Ended September 30, 2008

 

Nine Months Ended September 30, 2008

 

(millions except per share data)

 

Risk and
Insurance
Brokerage
Services

 

Consulting

 

Unallocated
Income &
Expense

 

Total

 

Risk and
Insurance
Brokerage
Services

 

Consulting

 

Unallocated
Income &
Expense

 

Total

 

Revenue as reported

 

$1,473

 

$337

 

$36

 

$1,846

 

$4,649

 

$1,016

 

$42

 

$5,707

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before provision for income tax - as reported

 

$192

 

$52

 

$(26

)

$218

 

$669

 

$158

 

$(125

)

$702

 

Restructuring charges (2005 and 2007 plan)

 

53

 

1

 

—

 

54

 

159

 

8

 

—

 

167

 

Anti-bribery and compliance initiatives

 

6

 

—

 

—

 

6

 

31

 

—

 

—

 

31

 

Benfield costs

 

—

 

—

 

6

 

6

 

—

 

—

 

6

 

6

 

Gain on sale of land

 

—

 

—

 

—

 

—

 

(5

)

—

 

—

 

(5

)

Income (loss) from continuing operations before provision for income tax - as adjusted

 

$251

 

$53

 

$(20

)

284

 

$854

 

$166

 

$(119

)

901

 

Provision for income taxes (2)

 

 

 

 

 

 

 

77

 

 

 

 

 

 

 

247

 

Income from continuing operations - as adjusted

 

 

 

 

 

 

 

207

 

 

 

 

 

 

 

654

 

Less: Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

12

 

Income from continuing operations - as adjusted

 

 

 

 

 

 

 

$203

 

 

 

 

 

 

 

$642

 

Diluted earnings per share from continuing operations - as adjusted

 

 

 

 

 

 

 

$0.69

 

 

 

 

 

 

 

$2.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

 

 

 

 

 

293.9

 

 

 

 

 

 

 

308.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income margins - as adjusted

 

17.0

%

15.7

%

N/A

 

15.4

%

18.4

%

16.3

%

N/A

 

15.8

%

 

(1)

Certain noteworthy items impacting pretax income in 2009 and 2008 are described in this schedule. The income (loss) from continuing operations before provision for income tax, diluted earnings per share from continuing operations and related margins shown with the caption “as adjusted” are non-GAAP measures.

 

 

(2)

Tax rate for continuing operations is 26.7% and 27.1% for the third quarters ended September 30, 2009 and 2008, respectively, and 29.1% and 27.4% for the nine months ended September 30, 2009 and 2008, respectively (U.S. GAAP). All reconciling items are tax effected at the above rates, except for the nine months 2009 reconciling items, where the U.S. GAAP effective tax rate was adjusted to 27.7% to exclude the impact of the 40% tax rate applied to the $83 million U.S. pension curtailment gain.

 

12


 

Aon Corporation - Restructuring Plans (Unaudited) (1)

 

2007 Restructuring Plan

 

 

 

Actual

 

 

 

(millions)

 

Full Year
2007

 

Full Year
2008

 

Third
Quarter
2009

 

Nine
Months
2009

 

Total
Incurred to
Date

 

Estimated
Total

 

By Type:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workforce reduction

 

$

17

 

$

166

 

$

48

 

$

118

 

$

301

 

$

470

 

Lease consolidation

 

22

 

38

 

29

 

56

 

116

 

145

 

Asset impairments

 

4

 

18

 

3

 

7

 

29

 

38

 

Other costs associated with restructuring

 

3

 

29

 

4

 

11

 

43

 

47

 

Total restructuring and related expenses

 

$

46

 

$

251

 

$

84

 

$

192

 

$

489

 

$

700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk and Insurance Brokerage Services

 

$

41

 

$

234

 

$

69

 

$

171

 

$

446

 

$

645

 

Consulting

 

5

 

17

 

15

 

21

 

43

 

55

 

Total restructuring and related expenses

 

$

46

 

$

251

 

$

84

 

$

192

 

$

489

 

$

700

 

 

Benfield Restructuring Plan

 

 

 

 

 

 

 

Operations

 

 

 

 

 

(millions)

 

 

 

Purchase
Price
Allocation (2)

 

Third
Quarter
2009

 

Nine
Months
2009

 

Estimated
Total

 

 

 

By Type:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workforce reduction

 

 

 

$

51

 

$

6

 

$

31

 

$

97

 

 

 

Lease consolidation

 

 

 

24

 

7

 

11

 

47

 

 

 

Asset impairments

 

 

 

—

 

1

 

2

 

8

 

 

 

Other costs associated with restructuring

 

 

 

2

 

1

 

1

 

3

 

 

 

Total restructuring and related expenses

 

 

 

$

77

 

$

15

 

$

45

 

$

155

 

 

 

 

(1)

In the Consolidated Summary of Operations, workforce reductions are included in “Compensation and benefits,” lease consolidations and other costs associated with restructuring are included in “Other general expenses,” and asset impairments are included in “Depreciation and amortization.”

 

 

(2)

Represents updated estimate of liabilities to be incurred within one year of the acquisition date (11/30/08).

 

13


 

Aon Corporation

Condensed Consolidated Statements of Financial Position

 

 

 

As of

 

(millions)

 

Sept. 30, 2009

 

Dec. 31, 2008

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

580

 

$

582

 

Short-term investments

 

602

 

684

 

Receivables

 

1,844

 

1,990

 

Fiduciary assets (1)

 

9,551

 

10,678

 

Other current assets

 

349

 

355

 

Assets held for sale

 

—

 

237

 

Total Current Assets

 

12,926

 

14,526

 

Goodwill

 

5,957

 

5,637

 

Other intangible assets

 

763

 

779

 

Fixed assets, net

 

453

 

451

 

Investments

 

297

 

332

 

Other non-current assets

 

1,245

 

1,215

 

TOTAL ASSETS

 

$

21,641

 

$

22,940

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Fiduciary liabilities

 

$

9,551

 

$

10,678

 

Short-term debt

 

12

 

105

 

Accounts payable and accrued liabilities

 

1,377

 

1,560

 

Other current liabilities

 

277

 

314

 

Liabilities held for sale

 

—

 

146

 

Total Current Liabilities

 

11,217

 

12,803

 

Long-term debt

 

1,998

 

1,872

 

Pension, post employment and post retirement liabilities

 

1,245

 

1,694

 

Other non-current liabilities

 

1,051

 

1,156

 

TOTAL LIABILITIES

 

15,511

 

17,525

 

TOTAL STOCKHOLDERS’ EQUITY

 

5,990

 

5,310

 

Noncontrolling interest

 

140

 

105

 

TOTAL EQUITY

 

6,130

 

5,415

 

TOTAL LIABILITIES AND EQUITY

 

$

21,641

 

$

22,940

 

 

(1) Includes short-term investments:  2009 - $3,440; 2008 - $3,178.

 

14

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