Aon is a British company based in London that is active in the insurance and risk management industries.
- - - - - - - - - - - - - - - - - -------------------------------------------------------------------------------- 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, 1999 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 123 NORTH WACKER DRIVE, Identification No.) CHICAGO, ILLINOIS 60606 (Address of Principal Executive Offices) (Zip Code) (312) 701-3000 (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 *The Common Stock of the Registrant is also listed for trading on the Chicago Stock Exchange and the International Stock Exchange London. 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 23, 2000 was $5,042,411,250. Number of shares of $1.00 par value Common Stock outstanding as of February 23, 2000 was 256,453,450. DOCUMENTS FROM WHICH INFORMATION IS INCORPORATED BY REFERENCE: Annual Report to Stockholders of the Registrant for the Year 1999 (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 on April 18, 2000 of the Registrant (Part III) - - - - - - - - - - - - - - - - - --------------------------------------------------------------------------------
PART I ITEM 1. BUSINESS. The Registrant is a holding company whose operating subsidiaries carry on business in three distinct 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 Insurance Brokerage and Other Services segment consists principally of Aon's retail and reinsurance brokerage operations, which includes specialty and wholesale activity. These services are provided by Aon Group, Inc., its subsidiaries and certain other indirect subsidiaries of the Registrant (the "Aon Group") including Aon Risk Services Companies, Inc.; Aon Holdings bv; Aon Services Group, Inc.; Aon Re Worldwide, Inc.; Aon Group Limited; and Alternative Market Operations ("AMO"). The Consulting segment provides a range of consulting services including employee benefits, human resources, compensation and change management. These services are provided by Aon Consulting Worldwide, Inc. which is also a subsidiary of Aon Group. Aon Group revenues grew significantly in 1997, 1998 and 1999 when the Registrant acquired, among other companies, Alexander & Alexander Services Inc. ("A&A"), The Minet Group, and Jauch & Hubener in 1997; Le Blanc de Nicolay, Gil y Carvajal and Auto Insurance Specialists, Inc. in 1998; and the Nikols Group, Presidium Holdings, Inc. and Societe Generale d' Assurance et de Prevoganie in 1999. Aon's Insurance Underwriting segment is comprised of direct sales life and accident and health insurance, extended warranty, specialty and other insurance products. Combined Insurance Company of America ("Combined Insurance") engages in the marketing and underwriting of life and accident and health insurance products. Virginia Surety Company, Inc. and London General Insurance Company Limited offer extended warranty and specialty insurance products. The Registrant hereby incorporates by reference pages 8 through 17, 19 through 21, and pages 49 and 50 of the Annual Report to Stockholders of the Registrant for the Year 1999 ("Annual Report"). COMPETITION AND INDUSTRY POSITION (1) INSURANCE BROKERAGE AND OTHER SERVICES Aon Group, Inc. ("Aon Group"); Aon Risk Services Companies, Inc. ("Aon Risk Services Companies"); Aon Holdings bv ("Aon Holdings"); Aon Services Group, Inc. ("Aon Services Group"); Aon Re Worldwide, Inc. ("Aon Re"); Aon Group Limited ("AGL"); Alternative Market Operations ("AMO"). Aon Group is the holding company for the subsidiaries which conduct the Registrant's commercial brokerage and consulting operations. Aon Group companies have 550 offices around the world in 120 countries. In 1999, Aon Group employed over 39,000 professionals and support personnel to serve the diverse needs of clients. Aon Risk Services Companies' subsidiaries 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 Risk Services Companies' subsidiaries provide risk management services, including insurance placement, claims management, loss control and administrative services. It has also developed certain specialist niche areas such as marine, aviation, directors and officers liability, financial institutions, construction, energy, media and entertainment. In 1999, significant investments were made in professional talent, technology and the development of specialized products and services to meet the evolving needs of clients. Subsidiaries of Aon Risk Services Companies and Aon Holdings operate through owned offices in North America and Europe, as well as in South America, Africa, Australia and Asia. The acquisition of A&A significantly augmented the Registrant's presence in Latin America, Asia, Africa and Australia, and the acquisitions of Jauch & - 2 -
Hubener, Le Blanc de Nicolay, Gil y Carvajal and The Nikols Group strengthened the Registrant's presence throughout Europe. Aon Services Group addresses the highly specialized product development, consulting and administrative risk management needs of professional groups, service businesses, governments, healthcare providers and commercial organizations. It also provides underwriting management skills, claims and risk management expertise, and third-party administration services to insurance companies. Aon Services Group operating subsidiaries market and broker both the primary and reinsurance risks of these programs. For individuals and businesses, Aon Services Group provides affinity products for professional liability, life, disability income and personal lines. The acquisition of The Minet Group by the Registrant augmented Aon Services Group's already strong expertise in wholesale brokerage and professional liability programs. The 1998 acquisition of Auto Insurance Specialists, Inc., an insurance broker specializing in automobile insurance coverages, gives Aon Services Group a significant presence in that market with opportunities for wide geographic application. Aon's reinsurance brokerage activities are organized under Aon Re in the United States and AGL in the United Kingdom. Aon Re is the largest reinsurance broker in the world, offering reinsurance, analytical services and alternative risk financing vehicles. Aon Re serves the alternative market with reinsurance placement, alternative risk services, captive management services and catastrophe information forecasting. AGL is a London-based Lloyd's broker that places wholesale and reinsurance business in the London and international markets and serves the needs of a wide range of clients around the world. AMO was established by Aon in late 1997 and is a leader in specialty underwriting solutions and custom-designed products and services. Several of AMO's specialties include entertainment, public entities, professional liability, workers compensation, and media business and financial institutions. (2) CONSULTING Aon Consulting Worldwide, Inc. ("Aon Consulting") Subsidiaries of Aon Consulting (and the European benefits operations of Aon Holdings) serve the employee benefit needs of clients around the world. Aon Consulting is one of the world's largest integrated human resources consulting organizations. Focusing on the increasing demand for outsourcing solutions, Aon Consulting targets emerging businesses, IPOs, recent mergers and acquisitions and corporations that are reengineering staff functions. In the United States, the benefits environment continues to change as companies look for ways to manage their benefits costs while increasing the choices offered to their employees. Aon Consulting, with its expertise in all areas of benefits and compensation, and its access to the Registrant's other subsidiaries, is well-positioned to serve this market. Aon Consulting subsidiaries offer services to clients including organizational analysis and HR strategic planning, recruitment and selection, benefits design and management training and development, job design and competency modeling; compensation and reward systems; human resources compliance and risk management; and individual and organizational change management. Benefits issues in foreign countries are becoming more complicated, and Aon Holdings and Aon Consulting anticipate increased demand for their services in these markets. - 3 -
(3) INSURANCE UNDERWRITING Combined Insurance Company of America ("Combined Insurance"); Combined Life Insurance Company of New York ("CLICNY"); Virginia Surety Company, Inc. ("VSC"); 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 the Pacific by providing accident and health coverage, traditional life insurance and extended warranties through distribution networks most of which are directly owned by the Registrant's subsidiaries. The life and accident and health distribution network encompasses primarily the agents of Combined Insurance and CLICNY ( which operates exclusively in the State of New York). With more than five million policy- holders, Combined Insurance has more individual accident policies in force than any other United States company. Combined Insurance, the Registrant's principal life and accident and health insurer, has a direct sales force of several thousand career agents calling on individuals to sell a broad spectrum of accident and health products and is one of the few companies with agents that call on customers every six months to renew coverage and to sell additional coverage. Combined Insurance's current product portfolio often allows policy- holders the option of paying premiums monthly through a pre-authorized check mechanism. Those policyholders are still called on by an agent to add additional coverage. Combined Insurance offers a wide range of accident-only and sickness- only insurance products, including short-term disability, cancer aid, Medicare supplement, disability income and long-term care coverage. 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. In addition to its traditional business, Combined Insurance has expanded its product distribution through payroll deduction, worksite marketing programs. Combined Insurance's business is conducted by the Registrant's operations in the United States, Canada, Latin America, Europe and Asia Pacific. Combined Insurance and CLICNY market whole life products through direct sales career agents in the United States. The Registrant's extended warranty and specialty insurance business, conducted by VSC subsidiaries in North America, South America and Asia Pacific and London General in Europe, is composed primarily of extended warranty insurance products, professional liability insurance coverages, workers' compensation and specialty financial institution coverages. VSC and London General are among the world's largest underwriters of consumer extended warranties. The automobile warranty products are sold in the United States, Canada, the United Kingdom, Ireland, France, The Netherlands, Belgium, Spain, Argentina, Brazil, Australia and Japan. Aon Warranty Group handles the administration of certain extended warranty products on automobiles, electronic goods, personal computers and appliances. It serves manufacturers, distributors and retailers of major worldwide consumer product and financial institutions, associations and affinity groups in North America and in Europe. - 4 -
(4) DISCONTINUED OPERATIONS The Registrant hereby incorporates by reference note 4 of the Notes to Consolidated Financial Statements on page 35 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 the generally accepted accounting principles 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 generally accepted accounting principles are based on a going-concern concept. The state insurance regulators are members of the National Association of Insurance Commissioners ("NAIC"). This Association 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. Any increase in any solvency-related oversight by the states is not expected to have any significant impact on the insurance business of the Registrant. 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 - 5 -
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 the enactment of S 900 will have a material effect on the business of its insurance institutions. 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 50,000 employees at the end of 1999 of whom approximately 42,000 are salaried and hourly employees and the remaining 8,000 are sales representatives 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. Loss of the use of any owned or leased property, while potentially disruptive, would have no material impact on the Registrant. - 6 -
ITEM 3. LEGAL PROCEEDINGS. The Registrant hereby incorporates by reference note 13 of the Notes to Consolidated Financial Statements on pages 47 and 48 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 16, 1999 to serve until the meeting of the Board following the annual meeting of stockholders on April 18, 2000. Ages shown are as of December 31, 1999. For information concerning certain directors and executive officers of the Registrant, see item 10 below. As of March 24, 2000, 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, 63 1972 Mr. Medvin became Vice President Executive Vice President and and Chief Financial Officer of the Chief Financial Officer Registrant in 1982 and was elected to his current position in 1987. He also serves as a Director or Officer of certain of the Registrant's subsidiaries. Daniel T. Cox, 53 1986 Mr. Cox was elected to his current Executive Vice President position in 1991 and, prior to their sale in 1996, had served as Chairman and Chief Executive Officer of certain of the Registrant's under- writing subsidiaries. Mr. Cox has headed the Registrant's benefits consulting operation since 1987. He also serves as Director or Officer of certain of the Registrant's subsidiaries. Michael A. Conway, 52 1990 Mr. Conway was Vice President of Senior Vice President and Combined Insurance from 1980 to Senior Investment Officer 1984. Following other 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. - 7 -
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, Chicago and London stock exchanges. The Registrant hereby incorporates by reference the "Dividends paid per share" and "Price range" data on page 52 of the Annual Report. The Registrant had approximately 13,300 holders of record of its Common Shares as of February 23, 2000. The Registrant hereby incorporates by reference note 9 of the Notes to Consolidated Financial Statements on page 40 of the Annual Report. ITEM 6. SELECTED FINANCIAL DATA. The Registrant hereby incorporates by reference the "Selected Financial Data" table on page 52 of the Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Registrant hereby incorporates by reference "Financial and Operations Highlights - Management's Discussion and Analysis" on pages 18 through 24 and "Information Concerning Forward-Looking Statements" on page 54 of the Annual Report. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Registrant hereby incorporates by reference "Market Risk Exposure" on pages 23 and 24 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 ..................... 25 - 29 Notes to Consolidated Financial Statements ............ 30 - 50 Report of Ernst & Young LLP, Independent Auditors ..... 51 Quarterly Financial Data .............................. 53 ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not Applicable. - 8 -
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 18, 2000, 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 through 12 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 1999 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, 9 and 10 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 page 21 of the Proxy Statement. - 9 -
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: <TABLE> <CAPTION> Annual Report Page(s) ------- <S> <C> Consolidated Statements of Income - Years Ended December 31, 1999, 1998 and 1997 25 Consolidated Statements of Financial Position - As of December 31, 1999 and 1998 26-27 Consolidated Statements of Stockholders' Equity - Years Ended December 31, 1999, 1998 and 1997 28 Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998 and 1997 29 Notes to Consolidated Financial Statements 30-50 Report of Ernst & Young LLP, Independent Auditors 51 </TABLE> 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) Bylaws of the Registrant - incorporated by reference to Exhibit (d) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1982 (the "1982 Form 10-K"). - 10 -
(d) 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. (e) Resolutions establishing terms of 6.875% Notes Due 1999 and 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"). (f) 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"). (g) Resolutions establishing the terms of the 6.90 % Notes Due 2004. (h) 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"). (i) 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. (j) Certificate of Trust of Aon Capital A - incorporated by reference to Exhibit 4.3 of the Capital Securities Registration. (k) 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. (l) 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. (m) 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. (n) 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. (o) 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. (p) 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. (q) 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. - 11 -
(r) 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. (s) 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. (t) 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. (u) Statement regarding Computation of Ratio of Earnings to Fixed Charges. (v) Statement regarding Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. (w) 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. (x) Annual Report to Stockholders of the Registrant for the year ended December 31, 1999 (for information, and not to be deemed filed, except for those portions specifically incorporated by reference herein). (y) List of Subsidiaries of the Registrant. (z) 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 1999 Annual Report to Stockholders and into Aon's Registration Statement Nos. 33-27984, 33-42575, 33-59037, 333-21237, 333-50607, 333-55773 and 333-78723. (aa) Annual Report to the Securities and Exchange Commission on Form 11-K for the Aon Savings Plan for the year ended December 31, 1999 - to be filed by amendment as provided in Rule 15d- 21(b). (ab) Executive Compensation Plans and Arrangements: (A) 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"). (B) 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"). (C) 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. (D) 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. - 12 -
(E) 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"). (F) 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. (G) 1999 Aon Deferred Compensation Plan. (H) 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. (I) 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. (ac) 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. (ad) 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. (ae) 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. (af) 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"). (ag) 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. (b) Reports on Form 8-K. The Registrant filed no Current Reports on Form 8-K during the last quarter of the Registrant's year ended December 31, 1999. - 13 -
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 17th day of March, 2000. 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 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Officer and Director Patrick G. Ryan (Principal Executive Officer) /s/DANIEL T. CARROLL Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Daniel T. Carroll /s/FRANKLIN A. COLE Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Franklin A. Cole /s/EDGAR D. JANNOTTA Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Edgar D. Jannotta /s/LESTER B. KNIGHT Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Lester B. Knight /s/PERRY J. LEWIS Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Perry J. Lewis /s/ANDREW J. McKENNA Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Andrew J. McKenna /s/NEWTON N. MINOW Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Newton N. Minow - 14 -
SIGNATURE TITLE DATE --------- ----- ---- /s/RICHARD C. NOTEBAERT Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Richard C. Notebaert /s/MICHAEL D. O'HALLERAN Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Michael D. O'Halleran /s/DONALD S. PERKINS Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Donald S. Perkins /s/JOHN W. ROGERS, JR. Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- John W. Rogers, Jr. /s/GEORGE A. SCHAEFER Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- George A. Schaefer /s/RAYMOND I. SKILLING Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Raymond I. Skilling /s/FRED L. TURNER Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Fred L. Turner /s/ARNOLD R. WEBER Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Arnold R. Weber /s/CAROLYN Y. WOO Director March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- Carolyn Y. Woo /s/HARVEY N. MEDVIN Executive Vice President March 17, 2000 - - - - - - - - - - - - - - - - - ---------------------------- and Chief Financial Harvey N. Medvin Officer (Principal Financial and Accounting Officer) - 15 -
<TABLE> <CAPTION> SCHEDULE I Aon Corporation (Parent Company) CONDENSED STATEMENTS OF FINANCIAL POSITION As of December 31 ------------------------ (millions) 1999 1998 ----------- ----------- ASSETS <S> <C> <C> Investments in subsidiaries ........................ $ 5,585 $ 5,305 Notes receivable - subsidiaries .................... 447 239 Cash and cash equivalents .......................... 17 6 Other assets ....................................... 123 84 ----------- ----------- Total Assets ................................... $ 6,172 $ 5,634 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Short-term borrowings .............................. $ 823 $ 436 6.3% long-term debt securities ..................... 100 100 7.4% long-term debt securities ..................... 100 100 6.875% long-term debt securities.................... - 100 6.9% long-term debt securities ..................... 250 - 6.7% long-term debt securities ..................... 150 150 Subordinated debt .................................. 800 800 Notes payable - subsidiaries ....................... 622 588 Notes payable - other .............................. 70 70 Debt guarantee of employee stock ownership plan .... - 17 Accrued expenses and other liabilities ............. 156 206 ----------- ----------- TOTAL LIABILITIES .............................. 3,071 2,567 ----------- ----------- Redeemable Preferred Stock ........................ 50 50 STOCKHOLDERS' EQUITY Common stock ....................................... 259 172 Paid-in additional capital ......................... 525 450 Accumulated other comprehensive loss ............... (309) (116) Retained earnings .................................. 2,905 2,782 Less treasury stock at cost ........................ (90) (58) Less deferred compensation ......................... (239) (213) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY ..................... 3,051 3,017 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $ 6,172 $ 5,634 =========== =========== See notes to condensed financial statements. </TABLE> - 16 -
<TABLE> <CAPTION> SCHEDULE I (Continued) Aon Corporation (Parent Company) CONDENSED STATEMENTS OF INCOME Years Ended December 31 ---------------------------- (millions) 1999 1998 1997 -------- -------- -------- REVENUE <S> <C> <C> <C> Dividends from subsidiaries ........................ $ 467 $ 351 $ 180 Other investment income ............................ 20 69 51 -------- -------- -------- TOTAL REVENUE ................................. 487 420 231 -------- -------- -------- EXPENSES Operating and administrative ....................... 13 20 6 Interest - subsidiaries ............................ 96 94 85 Interest - other ................................... 85 76 62 -------- -------- -------- TOTAL EXPENSES ................................ 194 190 153 -------- -------- -------- INCOME BEFORE INCOME TAXES AND EQUITY (DEFICIT) IN UNDISTRIBUTED INCOME OF SUBSIDIARIES ................ 293 230 78 Income tax benefit ................................. 70 54 43 -------- -------- -------- 363 284 121 EQUITY (DEFICIT) IN UNDISTRIBUTED INCOME OF SUBSIDIARIES.. (11) 257 178 -------- -------- -------- NET INCOME ......................................... $ 352 $ 541 $ 299 ======== ======== ======== - - - - - - - - - - - - - - - - - ------------------------------------------------------------------------------------------- See notes to condensed financial statements. </TABLE> - 17 -
<TABLE> <CAPTION> SCHEDULE I (Continued) Aon Corporation (Parent Company) CONDENSED STATEMENTS OF CASH FLOWS Years Ended December 31 ------------------------------ (millions) 1999 1998 1997 -------- --------- --------- <S> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES ............................ $ 287 $ 445 $ 124 CASH FLOWS FROM INVESTING ACTIVITIES: Investments in subsidiaries ............................... (363) (93) (1,355) Notes receivables from subsidiaries ....................... (208) (16) (135) -------- --------- --------- CASH USED BY INVESTING ACTIVITIES .................... (571) (109) (1,490) -------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Treasury stock transactions - net ......................... (66) (18) 21 Issuance (repayment) of short-term borrowings - net ....... 387 (328) 542 Issuance of company-obligated mandatorily redeemable preferred capital securities of subsidiary trust .. - - 800 Issuance of notes payable and long-term debt .............. 284 200 114 Repayment of long-term debt ............................... (100) - - Retirement of preferred stock ............................. - - (136) Cash dividends to stockholders ............................ (210) (194) (182) -------- --------- --------- CASH PROVIDED (USED) BY FINANCING ACTIVITIES ......... 295 (340) 1,159 -------- --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................ 11 (4) (207) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................. 6 10 217 -------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR ........................ $ 17 $ 6 $ 10 ======== ========= ========= See notes to condensed financial statements. </TABLE> - 18 -
SCHEDULE I (Continued) Aon Corporation (Parent Company) NOTES TO CONDENSED FINANCIAL STATEMENTS (1) See notes to consolidated financial statements incorporated by reference from the 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 $170 million may be subject to approval by regulatory authorities. (3) Subsidiary Guarantees --------------------- In 1998, Aon guaranteed a committed bank credit facility under which certain European subsidiaries can borrow up to EUR 400 million. At December 31, 1999, loans of EUR 347 million ($351 million) were outstanding under this facility. An indirect wholly-owned subsidiary of Aon Corporation manages various investment portfolios, totaling $297 million at December 31, 1999, 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) During 1998, Aon Corporation (Parent Company) reclassified $523 million of notes receivables-subsidiaries to investments in subsidiaries related to its brokerage operations. - 19 -
<TABLE> <CAPTION> SCHEDULE II Aon CORPORATION and SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1999, 1998 and 1997 (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 - - - - - - - - - - - - - - - - - -------------------------------------------------------- ------------- ------------- ------------- ------------- <S> <C> <C> <C> <C> <C> YEAR ENDED DECEMBER 31, 1999 ---------------------------- Reserve for losses (2) (deducted from other long-term investments) $ 9 $ - $ (9) $ - $ - Allowance for doubtful accounts (3) (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 YEAR ENDED DECEMBER 31, 1998 ---------------------------- Reserve for losses (2) (deducted from other long-term investments) $ 9 $ - $ - $ - $ 9 Allowance for doubtful accounts (3) (deducted from insurance brokerage and consulting receivables) 81 20 (5) (3) 93 Allowance for doubtful accounts (deducted from premiums and other) 5 1 - - 6 YEAR ENDED DECEMBER 31, 1997 ---------------------------- Reserve for losses (2) (deducted from other long-term investments) $ 5 $ - $ 4 $ - $ 9 Allowance for doubtful accounts (3) (deducted from insurance brokerage and consulting receivables) 60 9 27 (15) 81 Allowance for doubtful accounts (deducted from premiums and other) 3 2 - - 5 <FN> (1) Amounts deemed to be uncollectible. (2) Amounts shown in additions charged/(credited) to other accounts represent (income) losses on disposals. (3) Amounts shown in additions charged/(credited) to other accounts represent reserves related to acquired business and foreign exchange. </FN> </TABLE> - 20 -
<TABLE> <CAPTION> SCHEDULE II.1 Aon Corporation and Subsidiaries CONSOLIDATED SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES AS OF DECEMBER 31, 1999 Amount Shown in Statement Amortized Fair of Financial (millions) Cost or Cost Value Position ------------ ------------ ------------ <S> <C> <C> <C> FIXED MATURITIES - AVAILABLE FOR SALE: US government and agencies ................... $ 170 $ 160 $ 160 States and political subdivisions ............ 8 7 7 Debt securities of foreign governments not classified as loans ................. 755 750 750 Corporate securities ......................... 1,530 1,450 1,450 Public utilities ............................. 47 45 45 Mortgage-backed securities ................... 44 43 43 Other fixed maturities ....................... 43 42 42 ------------ ------------ ------------ TOTAL FIXED MATURITIES .................. 2,597 2,497 2,497 ------------ ------------ ------------ EQUITY SECURITIES - AVAILABLE FOR SALE: Common stocks: Public utilities ......................... 2 1 1 Banks, trusts and insurance companies .... 151 149 149 Industrial, miscellaneous and all other .. 125 103 103 Non-redeemable preferred stocks .............. 384 321 321 ------------ ------------ ------------ TOTAL EQUITY SECURITIES ................. 662 574 574 ------------ ------------ ------------ Mortgage loans on real estate .................... 4 * 4 * Real estate - net of depreciation ................ 10 * 10 * Policy loans ..................................... 65 * 65 * Other long-term investments ...................... 672 * 672 * Short-term investments ........................... 2,362 2,362 ------------ ------------ TOTAL INVESTMENTS ....................... $ 6,372 $ 6,184 ------------ ------------ <FN> * These investment categories are combined and are shown as other investments in the Statement of Financial Position. </FN> </TABLE> - 21 -
<TABLE> <CAPTION> SCHEDULE II.2 Aon Corporation and Subsidiaries REINSURANCE Y e a r E n d e d D e c e m b e r 3 1 , 1 9 9 9 -------------------------------------------------------------------------------------- Ceded to Assumed Percentage of (millions) Gross other from other amount amount companies companies Net amount assumed to net -------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> LIFE INSURANCE IN FORCE ............ $ 14,444 $ 15,902 $ 7,567 $ 6,109 124% =============== ================ ================ =============== ================ PREMIUMS Life Insurance ................. $ 227 $ 93 $ 2 $ 136 2% 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% =============== ================ ================ =============== ================ Y e a r E n d e d D e c e m b e r 3 1 , 1 9 9 8 -------------------------------------------------------------------------------------- Ceded to Assumed Percentage of Gross other from other amount amount companies companies Net amount assumed to net -------------------------------------------------------------------------------------- LIFE INSURANCE IN FORCE ............ $ 10,653 $ 9,813 $ 5,510 $ 6,350 87% =============== ================ ================ =============== ================ PREMIUMS Life Insurance ................. $ 235 $ 103 $ 7 $ 139 5% A&H Insurance .................. 1,134 235 46 945 5% Specialty Property & Casualty .. 734 241 96 589 16% --------------- ---------------- ---------------- --------------- ---------------- TOTAL PREMIUMS ............... $ 2,103 $ 579 $ 149 $ 1,673 9% =============== ================ ================ =============== ================ Y e a r E n d e d D e c e m b e r 3 1 , 1 9 9 7 -------------------------------------------------------------------------------------- Ceded to Assumed Percentage of Gross other from other amount amount companies companies Net amount assumed to net -------------------------------------------------------------------------------------- LIFE INSURANCE IN FORCE ............ $ 10,438 $ 12,515 $ 8,823 $ 6,746 131% =============== ================ ================ =============== ================ PREMIUMS Life Insurance ................. $ 214 $ 154 $ 86 $ 146 59% A&H Insurance .................. 1,073 278 140 935 15% Specialty Property & Casualty .. 634 178 72 528 14% --------------- ---------------- ---------------- --------------- ---------------- TOTAL PREMIUMS ............... $ 1,921 $ 610 $ 298 $ 1,609 19% =============== ================ ================ =============== ================ </TABLE> - 22 -
<TABLE> <CAPTION> SCHEDULE II.3 Aon Corporation and Subsidiaries SUPPLEMENTARY INSURANCE INFORMATION Future policy benefits Unearned Deferred losses, premiums policy claims and other Net acquistion and loss policyholders' Premium investment (millions) costs expenses funds revenue income(1) ----------- ------------ ----------- ------------ ----------- YEAR ENDED DECEMBER 31, 1999 - - - - - - - - - - - - - - - - - ---------------------------- <S> <C> <C> <C> <C> <C> Insurance brokerage and other services $ - $ - $ - $ - $ 159 Consulting - - - - 3 Insurance underwriting 636 1,769 3,219 1,808 251 Corporate and other - - - - 164 ----------- ------------ ----------- ------------ ----------- TOTAL $ 636 $ 1,769 $ 3,219 $ 1,808 $ 577 =========== ============ =========== ============ =========== YEAR ENDED DECEMBER 31, 1998 - - - - - - - - - - - - - - - - - ---------------------------- Insurance brokerage and other services $ - $ - $ - $ - $ 194 Consulting - - - - 6 Insurance underwriting 573 1,765 3,058 1,673 240 Corporate and other - - - - 150 ----------- ------------ ----------- ------------ ----------- TOTAL $ 573 $ 1,765 $ 3,058 $ 1,673 $ 590 =========== ============ =========== ============ =========== YEAR ENDED DECEMBER 31, 1997 - - - - - - - - - - - - - - - - - ---------------------------- Insurance brokerage and other services $ - $ - $ - $ - $ 163 Consulting - - - - 6 Insurance underwriting 549 1,752 2,698 1,609 214 Corporate and other - - - - 117 ----------- ------------ ----------- ------------ ----------- TOTAL $ 549 $ 1,752 $ 2,698 $ 1,609 $ 500 =========== ============ =========== ============ =========== Benefits Amortization claims, of deferred Commissions, losses and policy Other fees settlement acquisition operating Premiums (millions) and other expenses costs expenses written(2) ----------- ------------ ----------- ------------ ----------- 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 =========== ============ =========== ============ =========== YEAR ENDED DECEMBER 31, 1998 - - - - - - - - - - - - - - - - - ---------------------------- Insurance brokerage and other services $ 3,588 $ - $ - $ 3,119 $ - Consulting 609 - - 547 - Insurance underwriting 33 896 216 551 1,668 Corporate and other - - - 233 - ----------- ------------ ----------- ------------ ----------- TOTAL $ 4,230 $ 896 $ 216 $ 4,450 $ 1,668 =========== ============ =========== ============ =========== YEAR ENDED DECEMBER 31, 1997 - - - - - - - - - - - - - - - - - ---------------------------- Insurance brokerage and other services $ 3,058 $ - $ - $ 2,917 $ - Consulting 547 - - 508 - Insurance underwriting 35 842 208 530 1,596 Corporate and other 2 - - 204 - ----------- ------------ ----------- ------------ ----------- TOTAL $ 3,642 $ 842 $ 208 $ 4,159 $ 1,596 =========== ============ =========== ============ =========== <FN> (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. </FN> </TABLE> - 23 -
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 1999 ("Annual Report") pages 8 through 17, 19 through 21, and pages 35, 49 and 50. Item 3. Legal Proceedings Annual Report pages 47 and 48 (note 13 of Notes to Consolidated Financial Statements). PART II - - - - - - - - - - - - - - - - - ------- Item 5. Market for the Registrant's Annual Report page 40 (note 9 of Common Stock and Related Notes to Consolidated Financial Security Holder Matters Statements) and page 52 ("Dividends paid per share" and "Price range"). Item 6. Selected Financial Data Annual Report page 52. Item 7. Management's Discussion Annual Report pages 18 through and Analysis of Financial 24 and page 54 ( "Information Condition and Results of Concerning Forward-Looking Operations Statements"). Item 7A. Quantitative and Qualitative Annual Report pages 23 and 24 Disclosures about Market Risk ("Market Risk Exposure"). Item 8. Financial Statements and Annual Report pages 25 through 50 Supplementary Data and 53. PART III - - - - - - - - - - - - - - - - - -------- Item 10. Directors and Executive Proxy Statement For Annual Meeting Officers of the Registrant of Stockholders on April 18, 2000 of the Registrant ("Proxy Statement") pages 3, 6, 7, and 10 through 12. Item 11. Executive Compensation Proxy Statement pages 14 through 17. Item 12. Security Ownership of Proxy Statement pages 2, 9 and 10. Certain Beneficial Owners and Management Item 13. Certain Relationships and Proxy Statement page 21 Related Transactions ("Transactions With Management"). PART IV - - - - - - - - - - - - - - - - - ------- Item 14. Exhibits, Financial Statement Annual Report pages 25 through 50. Schedules, And Reports on Form 8-K - 24 -
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) Bylaws of the Registrant - incorporated by reference to Exhibit (d) to the 1982 Form 10-K. (d) 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 6.875% Notes Due 1999 and 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. (f) 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"). (g) 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. (h) Certificate of Trust of Aon Capital A - incorporated by reference to Exhibit 4.3 of the Capital Securities Registration. - 25 -
EXHIBIT INDEX EXHIBIT NUMBER PAGE NUMBER OF REGULATION SEQUENTIALLY S-K, ITEM 601 NUMBERED COPY - - - - - - - - - - - - - - - - - ------------- ------------- (i) 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. (j) 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. (k) 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. (l) 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. (m) 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. (10) Material Contracts: (a) 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"). (b) 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"). (c) 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. (d) 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. - 26 -
EXHIBIT INDEX EXHIBIT NUMBER PAGE NUMBER OF REGULATION SEQUENTIALLY S-K, ITEM 601 NUMBERED COPY - - - - - - - - - - - - - - - - - ------------- ------------- (e) 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. (f) 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. (g) 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. (h) 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. (i) 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. (j) Aon Corporation 1995 Senior Officer Incentive Compensation Plan - incorporated by reference to Exhibit 10(p) to the 1995 Form 10-K. (k) 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. (l) 1999 Aon Deferred Compensation Plan. (m) 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. (n) 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. (o) 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. (p) 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. - 27 -
EXHIBIT INDEX EXHIBIT NUMBER PAGE NUMBER OF REGULATION SEQUENTIALLY S-K, ITEM 601 NUMBERED COPY - - - - - - - - - - - - - - - - - ------------- ------------- (q) 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. (r) 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. (s) 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. (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, 1999. (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 1999 Annual Report to Stockholders and into Aon's Registration Statement Nos. 33-27984, 33-42575, 33-59037, 333-21237, 333-50607, 333-55773 and 333-78723. (99) Annual Report to the Securities and Exchange Commission on Form 11-K for the Aon Savings Plan for the year ended December 31, 1999 - to be filed by amendment as provided in Rule 15d-21(b). - 28 -