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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, 1996
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*
8% Cumulative Perpetual Preferred Stock New York Stock Exchange
6.875% Notes Due 1999 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 26, 1997 was $5,717,654,603.
Number of shares of $1.00 par value Common Stock outstanding as of February 26,
1997: 110,945,346.
Documents From Which Information Is Incorporated By Reference:
Annual Report to Stockholders of the Registrant for the Year 1996
(Parts I, II and IV) Notice of Annual Meeting of Holders of
Common Stock and Series C Cumulative Preferred
Stock and Proxy Statement for Annual
Meeting of Stockholders on April 18,
1997 of the Registrant (Part III)
PART I
ITEM 1. BUSINESS.
The Registrant is a holding company comprised of two distinct segments:
insurance brokerage and consulting services and insurance underwriting.
Incorporated in 1979, it is the parent corporation of long-established and more
recently formed companies.
Aon Group, Inc., its subsidiaries and certain other indirect subsidiaries
of the Registrant ("Aon Group"): Aon Risk Services Companies, Inc.;Aon Holdings
bv; Aon Consulting Worldwide, Inc.; Aon Specialty Group, Inc.; Aon Re Worldwide,
Inc.; and Nicholson Jenner Leslie Group Limited provide reinsurance intermediary
services, benefits consulting and commercial insurance brokerage services. Aon
Group revenues grew significantly in fiscal 1997 and 1996, respectively, when
the Registrant acquired Alexander & Alexander Services Inc. in early 1997 and
Bain Hogg Group plc in October 1996.
Combined Insurance Company of America ("Combined Insurance") and Ryan
Insurance Group, Inc. engage in the marketing of life and accident and health
insurance products. Ryan Insurance Group, Inc.; Virginia Surety Company, Inc.;
and London General Insurance Company Limited offer extended warranty and
specialty insurance products.
In second quarter 1996, the Registrant and Combined Insurance sold two of
Combined Insurance's insurance subsidiaries, Union Fidelity Life Insurance
Company ("UFLIC") and The Life Insurance Company of Virginia ("LOV").
In second quarter 1996, Ryan Insurance Group, Inc. sold its North American
auto credit underwriting and distribution businesses, including the distribution
of auto extended warranty products.
The Registrant hereby incorporates by reference pages 6 through 15 of
the Annual Report to Stockholders of the Registrant for the Year 1996
("Annual Report").
Competition and Industry Position
(1) INSURANCE BROKERAGE AND CONSULTING SERVICES
Aon Group, Inc. ("Aon Group"); Aon Risk Services Companies, Inc. ("Aon Risk
Services Companies"); Alexander & Alexander Services Inc. ("A&A"); Aon Holdings
bv ("Aon Holdings"); Aon Specialty Group, Inc. ("Aon Specialty Group"); Aon
Consulting Worldwide, Inc. ("Aon Consulting"); Aon Re Worldwide,Inc. ("Aon Re");
Nicholson Jenner Leslie Group Limited ("Nicholson Jenner Leslie"); and Bain Hogg
Group plc ("Bain Hogg").
Aon Group,is the holding company for the Registrant's commercial brokerage
and consulting operation. Aon Group is the fastest growing global insurance
brokerage and consulting services firm in the world. The Aon Group companies
have more than 400 owned offices around the world in approximately 60 countries.
In 1996, Aon Group employed approximately 20,000 professionals and support
personnel to serve the diverse needs of clients.
Aon Risk Services Companies' (formerly Rollins Hudig Hall Co.), A&A's and
Bain Hogg's 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
- 2 -
Services Companies' subsidiaries offer comprehensive services to clients
including insurance placement, specialized brokerage services, program
development and administration, premium financing services, risk management and
loss-control consulting. It has also developed certain specialist niche areas
such as marine, aviation, directors and officers liability, financial
institutions, construction, energy, media and entertainment.
Aon Holdings (formerly Rollins Hudig Hall Holdings bv) traces its
commercial broking roots to 1688 and is one of the premier brokers in
Continental Europe with approximately 3,500 employees and subsidiaries in more
than 30 countries.
Subsidiaries of Aon Risk Services Companies, Aon Holdings, A&A and Bain
Hogg operate through owned offices in North America and Europe, as well as in
South America, Africa, Australia and Asia. In 1996, Aon Holdings subsidiaries
opened offices in Australia, Germany, France, Portugal, The Netherlands, South
Africa, Singapore, New Zealand, Norway and Finland. The acquisitions of A&A and
Bain Hogg will significantly augment the Registrant's presence in Latin America,
Asia, Africa and Australia.
Aon Specialty Group addresses the highly specialized product development,
consulting and administrative needs of professional groups, service businesses,
governments, health-care providers and commercial organizations. It also
provides underwriting management skills, claims and risk management expertise,
and third-party administration services to insurance companies. Aon Specialty
Group operating subsidiaries market and broker both the primary and reinsurance
risks of these programs. For individuals and busineses, ASG provides affinity
products for professional liability, life and personal lines.
Subsidiaries of Aon Consulting (formerly Godwins International, Inc.) 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,
IPO's, recent mergers or 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. Benefits issues in foreign countries are becoming more
complicated, and Aon Holdings and Aon Consulting anticipate increased demand for
their services in these markets.
Aon's reinsurance brokerage activities are organized under Aon Re. With the
acquisitions of A&A and Bain Hogg, Aon Re is a global leader in the reinsurance
and specialist brokerage industry. Aon Re serves the alternative market with
reinsurance placement, alternative risk services, captive management services
and catastrophe information forecasting.
Nicholson Jenner Leslie 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. A majority of
Nicholson Jenner Leslie's revenue is derived from sources unaffiliated with Aon.
- 3 -
(2) 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").
In April 1996, the Registrant and Combined Insurance Combined Insurance
completed the sales of Combined Insurance's direct response life and health
subsidiary, Union Fidelity Life Insurance Company ("UFLIC"), and Combined
Insurance's capital accumulation insurance subsidiary, The Life Insurance
Company of Virginia ("LOV").
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 global distribution
networks that are directly owned by the Registrant's subsidiaries.
The accident and health distribution network encompasses primarily the
agents of Combined Insurance. With more than five million policyholders,
Combined Insurance has more individual accident and health policies in force
than any other United States company. Combined Insurance, the Registrant's
principal 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. It 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 offers a wide range of accident-only and
sickness-only insurance products, including short-term disability, cancer aid,
Medicare supplement and disability income coverage. 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 is expanding its product distribution through payroll
deduction, worksite marketing programs.
Combined Insurance and its wholly-owned subsidiary CLICNY (which operates
exclusively in the State of New York) market whole life products through direct
sales career agents in the United States. Combined Insurance ranked among the
top 100 life insurance companies in the United States in terms of total life
premiums in 1995. Life insurance business is conducted by the Registrant's life
insurance subsidiaries in the United States, Canada, Ireland, Germany, and
New Zealand.
The Registrant's extended warranty and specialty insurance business,
conducted by subsidiaries VSC in North America 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 continue to be one of 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 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 Europe.
In second quarter 1996, Aon completed the sale of its North American auto
credit underwriting and distribution operations, including the distribution of
auto extended warranties throughout North America. The extended warranty
products will continue to be underwritten by VSC.
- 4 -
(3) DISCONTINUED OPERATIONS
The Life Insurance Company of Virginia ("LOV") and Union Fidelity Life
Insurance Company ("UFLIC").
In April 1996, the Registrant and Combined Insurance completed the sales of
Combined Insurance's subsidiaries, LOV and UFLIC. The business written by LOV
primarily included capital accumulation products and some other life products.
UFLIC operated in the United States in the highly competitive direct response
life and health marketing segment of the industry.
LICENSING AND REGULATION
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 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. This
focus is reflected in additional regulatory oversight by the states and emphasis
on the enactment or adoption of a series of NAIC model laws and regulations
designed to promote solvency. The 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.
Insurance companies are generally not subject to any federal regulation of
their insurance business because of the existence of a federal law commonly
known as the McCarran-Ferguson Act. McCarran-Ferguson provides the insurance
industry with immunity from certain aspects of the federal anti-trust law and
exempts the business of insurance from federal regulation. In the past several
years there have been a number of recommendations that McCarran-Ferguson be
repealed entirely or modified to remove the industry's anti-trust exemption and
subject it to federal regulation. If McCarran-Ferguson were to be repealed or
modified, state regulation of the insurance business would continue. The result
could be an additional layer of federal regulation. The Registrant expects that
any repeal of anti-trust exemptions available to insurers under the
McCarran-Ferguson Act would not have a significant impact on its operations.
- 5 -
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.
Regulatory authorities in the states 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,
regulatory authorities have relatively broad discretion with respect to
granting, renewing and revoking brokers' and agents' licenses to transact
business in the state. The manner of operating in particular states may vary
according to the licensing requirements of the particular state, which may
require, among other things, that a firm operate in the state through a local
corporation. In a few states, 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.
In 1996 the federal Health Care Insurance Portability and Accountability Act of
1996 was enacted. The Act requires the states to take action to implement the
requirements of the Act or to become subject to federal oversight. The
Registrant does not believe tht the state action required by the Act will
materially affect the business of the Registrant's subsidiaries. In addition,
federal laws mandating specific prectices by medical insurers have recently been
enacted from which, because of the nature of the business of the Registrant's
subsidiaries, the Registrant's subsidiaries are exempt. 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 state health care changes, the Registrant does not expect a major
impact on its operations because of the supplemental nature of most of the
policies issued by its insurance subsidiaries and because the coverages are
primarily purchased to provide, on a fixed-indemnity basis, protection against
loss-of-time or disability benefits. If health care reform does not provide for
a significant role for insurance companies currently writing primary medical
coverage, the Registrant expects that some of those companies would increase
their participation in other segments of the insurance underwriting business,
perhaps heightening the competition with Combined Insurance. Combined Insurance
and its subsidiaries currently operate successfully in several foreign countries
which have national health plans in effect.
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 28,000 employees at the end
of 1996 of whom approximately three-fourths are salaried and hourly employees
and the remaining one-fourth are sales representatives who are generally
compensated wholly or primarily by commission.
- 6 -
ITEM 2. PROPERTIES.
The Registrant's subsidiaries own and occupy office buildings in eight
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.
ITEM 3. LEGAL PROCEEDINGS.
The Registrant hereby incorporates by reference note 12 of the Notes to
Consolidated Financial Statements on page 40 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 19, 1996 to serve
until the meeting of the Board following the annual meeting of stockholders on
April 18, 1997. Ages shown are as of December 31, 1996.
For information concerning certain executive officers of the Registrant,
see item 10 below. As of March 26, 1997, the following individuals are also
executive officers of the Registrant as defined in Rule 16a-1(f):
- 7 -
Has Continuously
Served as an
Officer
of Registrant or
Name, Age, and One or
Current Office More of its
or Principal Subsidiaries Business Experience
Position Since Past 5 years
- -------------- -------------------- ----------------
Harvey N. Medvin, 60 1972 Mr. Medvin became Vice President
Executive Vice President, and Chief Financial Officer of
Chief Financial Officer the Registrant in 1982 and was
and Treasurer 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, 50 1986 Mr. Cox was elected to his
Executive Vice President current position in 1991 and,
prior to their sale, had served
as Chairman and Chief Executive
Officer of LOV since 1988 and
of Union Fidelity since 1989.
Mr. Cox had 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, 49 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.
Michael D. O'Halleran, 46 1987 Mr. O'Halleran was appointed
President and Chief Operating President and Chief Operating
Officer of Aon Group, Inc. Officer of Aon Group, Inc.in
1995. Prior thereto, since
joining the Registrant in
1987, he held a variety of
senior positions in the
Registrant's insurance and
reinsurance brokerage business.
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 43 of the Annual Report.
The Registrant had approximately 12,900 holders of record of its Common
Shares as of February 26, 1997.
The Registrant hereby incorporates by reference note 8 of the Notes to
Consolidated Financial Statements on pages 34 and 35 of the Annual Report.
ITEM 6. SELECTED FINANCIAL DATA.
The Registrant hereby incorporates by reference the "Selected Financial
Data" table on page 42 of the Annual Report.
- 8 -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Registrant hereby incorporates by reference "Management's Analysis of
Operating Results and Financial Condition" on pages 17 through 23 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 ........................... 24-28
Notes to Consolidated Financial Statements................... 29-40
Report of Ernst & Young LLP, Independent Auditors............ 41
Quarterly Financial Data .................................. 43
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Not Applicable.
- 9 -
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Registrant hereby incorporates by reference the information on pages 3
and 7 of the Notice of Annual Meeting of Holders of Common Stock and Series C
Preferred Stock and Proxy Statement For Annual Meeting of the Stockholders on
April 18, 1997, 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 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.
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 1996 Fiscal Year" and
"Pension Plan Table" on pages 12 through 15 of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Registrant hereby incorporates by reference the share ownership data
contained on pages 2, 8 and 9 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Registrant hereby incorporates by reference the information under the
heading "Transactions With Management" on page 20 of the Proxy Statement.
- 10 -
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2). The Registrant has incorporated by reference from the Annual
Report (see Item 8) the following consolidated financial statements of the
Registrant and subsidiaries:
Annual
Report
Page(s)
-------
Consolidated Statements of Financial Position--
As of December 31, 1996 and 1995 24-25
Consolidated Statements of Income --
Years Ended December 31, 1996, 1995 and 1994 26
Consolidated Statements of Stockholders' Equity --
Years Ended December 31, 1996, 1995 and 1994 27
Consolidated Statements of Cash Flows -- Years
Ended December 31, 1996, 1995 and 1994 28
Notes to Consolidated Financial Statements 29-40
Report of Ernst & Young LLP, Independent Auditors 41
Financial statement schedules of the Registrant and consolidated subsidiaries
not included in the Annual Report but filed herewith:
Consolidated Financial Statement Schedules --
________________________________________________________________________________
Schedule
--------
Summary of Investments -- Other than Investments
in Related Parties I
Parent Company Condensed Financial Statements II
Supplementary Insurance Information III
Reinsurance IV
Valuation and Qualifying Accounts V
Schedule VI is omitted as it is immaterial
(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 10-Q").
(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").
- 11 -
(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 Exhibit 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) Certificate of Designation for the Registrant's 8% Cumulative Perpetual
Preferred Stock, $1.00 par value -- incorporated by reference to
Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992 (the "Third Quarter 1992 Form 10-Q").
(h) 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.
(i) Registration Rights Agreement dated November 2, 1992 by and between the
Registrant and Frank B. Hall & Co. Inc. -- incorporated by reference to
Exhibit 4(c) to the Third Quarter 1992 Form 10-Q.
(j) 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.
(k) Deferred Compensation Agreement by and among the Registrant and
Registrant's directors who are not salaried employees of Registrant or
Registrant's affiliates -- incorporated by reference to Exhibit 10(i)
to the Registrant's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1987 (the "1987
Form 10-K").
(l) 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.
(m) Statement regarding Computation of Per Share Earnings.
(n) Statement regarding Computation of Ratio of Earnings to Fixed Charges.
(o) Statement regarding Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
(p) 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.
(q) Annual Report to Stockholders of the Registrant for the year ended
December 31, 1996 (for information, and not to be deemed filed, except
for those portions specifically incorporated by reference herein).
(r) List of subsidiaries of the Registrant.
- 12 -
(s) 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 1996
Annual Report to Stockholders and into Aon's Registration Statement
Nos. 33-27984, 33-42575, 33-57562, 33-59037 and 333-21237.
(t) Annual Report to the Securities and Exchange Commission on Form 11-K
for the Aon Savings Plan for the year ended December 31, 1996 -- to be
filed by amendment as provided in Rule 15d-21(b).
(u) Executive Compensation Plans and Arrangements:
(A) Aon Stock Option Plan -- incorporated by reference to Exhibit
10(a) to the Registrant's Annual Report to the Securities and
Exchange Commission on Form 10-K for the year ended December 31,
1990 (the "1990 Form 10-K").
(B) First Amendment to Aon Stock Option Plan -- incorporated by
reference to Exhibit 10(b) to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994 (the "Second
Quarter 1994 Form 10-Q").
(C) Second Amendment to Aon Stock Option Plan -- incorporated by
reference to Exhibit 10(c) to the Second Quarter 1994 Form 10-Q.
(D) 1994 Restatement of Aon Savings Plan-- incorporated by
reference to Exhibit 10(f) of the 1994 Form 10-K.
(E) 1994 Restatement of Aon Employee Stock Ownership Plan --
incorporated by reference to Exhibit 10(g) of the 1994 Form 10-K.
(F) Ryan Insurance Group, Inc. Stock Option Plan together with Stock
Option Assumption Agreement providing for amendment of the plan
-- incorporated by reference to Exhibit 4(b) to Registration
Statement No. 2-79114 on Form S-8.
(G) Aon Stock Award Plan, as amended -- incorporated by reference to
Exhibit 10(a) to the First Quarter 1994 Form 10-Q.
(H) First Amendment to the Aon Stock Award Plan -- incorporated by
reference to Exhibit 10(b) to the Second Quarter 1994 Form 10-Q.
(I) Second Amendment to Aon Stock Award Plan -- incorporated by
reference to Exhibit 10(d) to the Second Quarter 1994 Form 10-Q.
(J) 1994 Restatement of Aon Pension Plan-- incorporated by
reference to Exhibit 10(h) of the 1994 Form 10-K.
(K) 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").
(L) 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.
(v) 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.
- 13 -
(w) 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.
(x) 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.
(y) 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")
(z) 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, 1996.
- 14 -
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 26th day of
March, 1997.
Aon Corporation
By /s/PATRICK G. RYAN
---------------------------------------
Patrick G. Ryan, Chairman, President
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, President, Chief March 26, 1997
- ---------------------------- Executive Officer and Director
Patrick G. Ryan (Principal Executive Officer)
/s/DANIEL T. CARROLL Director March 26, 1997
- ----------------------------
Daniel T. Carroll
/s/FRANKLIN A. COLE Director March 26, 1997
- ----------------------------
Franklin A. Cole
/s/EDGAR D. JANNOTTA Director March 26, 1997
- ----------------------------
Edgar D. Jannotta
/s/PERRY J. LEWIS Director March 26, 1997
- ----------------------------
Perry J. Lewis
/s/JOAN D. MANLEY Director March 26, 1997
- ----------------------------
Joan D. Manley
- 15 -
/s/ANDREW J. MCKENNA Director March 26, 1997
- ----------------------------
Andrew J. McKenna
Director
- ----------------------------
Newton N. Minow
/s/PEER PEDERSEN Director March 26, 1997
- ----------------------------
Peer Pedersen
/s/DONALD S. PERKINS Director March 26, 1997
- ----------------------------
Donald S. Perkins
/s/JOHN W. ROGERS, JR. Director March 26, 1997
- ----------------------------
John W. Rogers, Jr.
/s/GEORGE A. SCHAEFER Director March 26, 1997
- ----------------------------
George A. Schaefer
/s/RAYMOND I. SKILLING Director March 26, 1997
- ----------------------------
Raymond I. Skilling
/s/FRED L. TURNER Director March 26, 1997
- ----------------------------
Fred L. Turner
/s/ARNOLD R. WEBER Director March 26, 1997
- ----------------------------
Arnold R. Weber
/s/HARVEY N. MEDVIN Executive Vice President, March 26, 1997
- ---------------------------- Chief Financial Officer
Harvey N. Medvin and Treasurer
(Principal Financial and
Accounting Officer)
- 16 -
SCHEDULE I
Aon Corporation and Subsidiaries
CONSOLIDATED SUMMARY OF INVESTMENTS - OTHER
THAN INVESTMENTS IN RELATED PARTIES
AS OF DECEMBER 31, 1996
Amount shown
in Statement
(millions) Amortized Fair of Financial
Cost Value Position
----------- ----------- -----------
Fixed Maturities - available for sale:
US government and agencies ........................... $ 45.4 $ 47.1 $ 47.1
States and political subdivisions .................... 491.1 514.2 514.2
Debt securities of foreign governments
not classified as loans ......................... 948.2 989.9 989.9
Corporate securities ................................. 976.0 1,021.6 1,021.6
Public utilities ..................................... 79.7 81.0 81.0
Mortgage-backed securities ........................... 63.6 65.3 65.3
Other fixed maturities ............................... 110.6 107.0 107.0
----------- ----------- -----------
TOTAL FIXED MATURITIES........................... 2,714.6 2,826.1 2,826.1
----------- ----------- -----------
Equity securities - available for sale:
Common stocks:
Banks, trusts, and insurance companies ............... 201.7 255.7 255.7
Industrial, miscellaneous, and all other ............. 70.3 138.1 138.1
Nonredeemable preferred stocks ....................... 479.0 485.4 485.4
----------- ----------- -----------
TOTAL EQUITY SECURITIES ......................... 751.0 $ 879.2 879.2
----------- ----------- -----------
Mortgage loans on real estate ............................. 29.7* 29.0*
Real estate - net of depreciation ......................... 17.8 17.8
Policy loans .............................................. 58.2 58.2
Other long-term investments ............................... 141.4* 136.2*
Short-term investments .................................... 1,266.3 1,266.3
----------- -----------
TOTAL INVESTMENTS .......................... $ 4,979.0 $ 5,212.8
=========== ===========
* Differences between amortized cost and amounts shown in Statements of
Financial Position for investments other than fixed maturity and equity
securities result from certain valuation allowances.
- 17 -
SCHEDULE II
Aon Corporation
(Parent Company)
CONDENSED STATEMENTS OF FINANCIAL POSITION
As of December 31,
-------------------------
(millions) 1996 1995
----------- -----------
ASSETS
Investments in subsidiaries .......................................... $ 3,268.9 $ 3,617.2
Notes receivable - subsidiaries ...................................... 482.6 468.2
Cash and cash equivalents............................................. 216.9 2.1
Other assets ......................................................... 34.4 6.6
----------- -----------
Total Assets .................................................... $ 4,002.8 $ 4,094.1
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Short-term borrowings ................................................ $ 213.4 $ 352.7
6.3% long-term debt securities ....................................... 99.8 99.7
7.4% long-term debt securities ....................................... 99.9 99.8
6.875% long-term debt securities ..................................... 99.9 99.8
6.7% long-term debt securities ....................................... 149.7 149.7
Notes payable - subsidiaries ......................................... 351.4 457.0
Notes payable - other ................................................ -- 15.7
Debt guarantee of employee stock ownership plan ...................... 46.1 56.8
Accrued expenses and other liabilities ............................... 59.7 39.2
----------- -----------
Total Liabilities ............................................... 1,119.9 1,370.4
----------- -----------
Redeemable Preferred Stock ........................................... 50.0 50.0
STOCKHOLDERS' EQUITY
Preferred stock ...................................................... 5.5 8.1
Common stock ......................................................... 114.1 111.4
Paid-in additional capital ........................................... 475.4 431.8
Net unrealized investment gains of subsidiaries ...................... 153.1 123.1
Net foreign exchange gains of subsidiaries ........................... 1.0 1.8
Retained earnings .................................................... 2,356.8 2,212.1
Less treasury stock at cost .......................................... (121.5) (97.3)
Less deferred compensation ........................................... (151.5) (117.3)
----------- -----------
Total Stockholders' Equity ...................................... 2,832.9 2,673.7
----------- -----------
Total Liabilities and Stockholders' Equity ...................... $ 4,002.8 $ 4,094.1
=========== ===========
See notes to condensed financial statements.
- 18 -
SCHEDULE II
(Continued)
Aon Corporation
(Parent Company)
CONDENSED STATEMENTS OF INCOME
Years ended December 31
---------------------------------------
1996 1995 1994
----------- ----------- -----------
(millions)
REVENUE
Dividends from subsidiaries .......................... $ 1,026.6 $ 199.3 $ 166.2
Other investment income .............................. 44.1 34.3 34.8
Realized investment losses ........................... (11.0) (4.1) --
----------- ----------- -----------
Total Revenue ................................... 1,059.7 229.5 201.0
EXPENSES
Operating and administrative ......................... 5.7 3.0 2.3
Interest - subsidiaries ............................... 20.6 20.0 12.2
Interest - other ...................................... 43.2 53.6 45.1
----------- ----------- -----------
Total Expenses (1)................................ 69.5 76.6 59.6
----------- ----------- -----------
INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME
OF SUBSIDIARIES ....................................... 990.2 152.9 141.4
Equity in undistributed income of subsidiaries ............. (655.0) 249.9 218.6
----------- ----------- -----------
NET INCOME ............................................ 335.2 402.8 360.0
=========== =========== ===========
See notes to condensed financial statements.
(1) Interest expense - other allocated to discontinued operations was $5
million, $18 million and $14 million for the years ended December 31, 1996,
1995 and 1994, respectively.
- 19 -
SCHEDULE II
(Continued)
Aon Corporation
(Parent Company)
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31
---------------------------------------
1996 1995 1994
----------- ----------- -----------
(millions)
Cash Flows From Operating Activities ...................... $ 1,016.9 $ 164.5 $ 164.1
Cash Flows From Investing Activities:
Investments in subsidiaries .......................... (319.3) (62.6) (31.3)
Notes receivables from subsidiaries .................. (10.8) 1.5 (15.5)
----------- ----------- -----------
Cash Used by Investing Activities ............... (330.1) (61.1) (46.8)
----------- ----------- -----------
Cash Flows From Financing Activities:
Treasury stock transactions - net .................... (40.1) (46.4) (15.4)
Issuance (repayment) of short-term borrowings - net .. (139.2) 108.8 75.3
Issuance of notes payable and long-term debt ......... -- 73.6 174.5
Repayment of notes payable and long-term debt ........ (105.6) -- (125.0)
Retirement of preferred stock ........................ (14.2) (75.4) (58.3)
Cash dividends to stockholders ....................... (172.9) (171.3) (162.3)
----------- ----------- -----------
Cash Used by Financing Activities ............... (472.0) (110.7) (111.2)
----------- ----------- -----------
Increase (Decrease) in Cash and Cash Equivalents .......... 214.8 (7.3) 6.1
Cash and Cash Equivalents at Beginning of Year ............ 2.1 9.4 3.3
----------- ----------- -----------
Cash and Cash Equivalents at end of Year .................. $ 216.9 $ 2.1 $ 9.4
=========== =========== ===========
See notes to condensed financial statements.
- 20 -
SCHEDULE II
(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. Cash and cash equivalents on the condensed statements of financial position
include short-term investments.
3. Payments made as assessments by state guaranty funds to cover losses to
policyholders of insurance companies under regulatory supervision for the
years ended December 31, 1996, 1995 and 1994 were $1.4 million, $5 million
and $6.9 million, respectively. In addition, Aon's reserve for the
recognition of probable assessments for known industry insolvencies was $0
million and $7 million at December 31, 1996 and 1995, respectively.
4. 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, payment of the amounts as dividends in
excess of $987 million may be subject to approval by regulatory
authorities.
5. Subsequent Event
On March 21, 1997, Aon's directors approved a three-for-two stock split,
payable on May 14, 1997 in the form of a stock dividend of one common share
for every two shares held, to stockholders of record as of the close of
business on May 1, 1997. Because the stock split was approved subsequent to
the distribution of Aon's 1996 Annual Report to Stockholders, references to
common stock and earnings per share data in the Annual Report to
Stockholders and in this Annual Report on Form 10-K have not been
retroactively adjusted. Retroactively adjusting such information to give
effect to the stock split for 1996, 1995 and 1994, respectively, would
result in net income per share of $1.91, $2.32 and $2.09 and dividends per
share of $0.95, $0.89 and $0.84.
- 21 -
Aon Corporation
(Parent Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(6) Below is a reconciliation of the combined statutory stockholders' equity
and net income of Aon's insurance subsidiaries to the consolidated
stockholders' equity and net income on a basis in accordance with generally
accepted accounting principles (GAAP):
(millions)
As of December 31, 1996 As of December 31, 1995
------------------------------------- -------------------------------------
Life/A&H P&C Combined Life/A&H P&C Combined
----------- ----------- ----------- ----------- ----------- -----------
Statutory Stockholders' Equity $ 611.7 $ 363.8 $ 975.5 $ 766.2 $ 296.6 $ 1,062.8
Insurance business related adjustments:
Deferred policy acquisition costs 488.8 110.0 598.8 1,177.9 83.6 1,261.5
Cost of insurance purchased -- -- -- 87.2 -- 87.2
Excess of cost over net assets purchased 2.6 -- 2.6 143.4 -- 143.4
Policy liabilities and reinsurance assets 112.1 -- 112.1 100.3 -- 100.3
Deferred income taxes (186.1) 24.3 (161.8) (301.8) 32.1 (269.7)
Investment valuation reserves 133.7 -- 133.7 176.3 -- 176.3
Non Admitted Assets 47.3 5.9 53.2 79.6 5.1 84.6
Unrealized capital gains (losses) (FAS 115) 76.8 34.8 111.6 74.8 40.2 115.0
------------------------------------- -------------------------------------
Subtotal $ 1,287.0 $ 538.8 1,825.7 $ 2,303.9 $ 457.6 2,761.4
======================== ========================
Investment in other operations and other 1,443.2 855.8
----------- -----------
Investments in subsidiaries 3,268.9 3,617.2
Elimination of parent company contributions (436.0) (943.5)
----------- -----------
Consolidated Stockholders' Equity $ 2,832.9 $ 2,673.7
=========== ===========
As of December 31, 1996 As of December 31, 1995
------------------------------------- -------------------------------------
Life/A&H P&C Combined Life/A&H P&C Combined
----------- ----------- ----------- ----------- ----------- -----------
Statutory Net Income * $ 807.4 $ 70.7 $ 878.1 $ 196.7 $ 57.5 $ 254.2
Insurance business related adjustments:
Deferred policy acquisition costs 121.6 95.1 216.7 325.6 84.7 410.3
Amortization of deferred policy acquisition
costs (166.9) (68.7) (235.6) (240.3) (62.4) (302.7)
Amortization of cost of insurance purchased (2.0) -- (2.0) (10.4) -- (10.4)
Amortization of excess of cost over net
assets purchased (0.9) -- (0.9) (4.9) -- (4.9)
Policy liabilities and reinsurance assets 11.8 -- 11.8 -- -- (31.0)
Deferred income taxes (4.0) (9.2) (13.3) (24.9) -- (24.9)
Change in valuation reserves 4.1 -- 4.1 5.6 -- 5.6
Deferred capital losses 2.8 (3.5) (0.7) 34.3 5.9 40.2
Difference in realized gain on sale of
subsidiar net of tax (551.2) (551.2)
Realized (gain)/loss on transfer of
subsidiary -- -- -- 7.0 -- 7.0
------------------------------------- -------------------------------------
Subtotal $ 222.8 $ 84.4 307.1 $ 288.8 $ 85.7 343.4
======================== ========================
Investment in other operations and other 28.1 59.4
----------- -----------
Consolidated Net Income - GAAP Basis $ 335.2 $ 402.8
=========== ===========
* net of intercompany dividends
As of December 31, 1994
-------------------------------------
Life/A&H P&C Combined
----------- ----------- -----------
Statutory Net Income * $ 271.9 $ 34.1 $ 306.0
Insurance business related adjustments:
Deferred policy acquisition costs 337.7 76.8 414.5
Amortization of deferred policy acquisition
costs (227.7) (48.5) (276.2)
Amortization of cost of insurance purchased (13.9) -- (13.9)
Amortization of excess of cost over net
assets purchased (4.8) -- (4.8)
Policy liabilities and reinsurance assets 19.2 -- 19.2
Deferred income taxes (64.7) (6.9) (71.6)
Change in valuation reserves 26.6 -- 26.6
Deferred capital losses -- -- --
Difference in realized gain on sale of
subsidiary net of tax
Realized (gain)/loss on transfer of
subsidiary (89.4) -- (89.4)
-------------------------------------
Subtotal $ 254.9 $ 55.5 310.4
========================
Investment in other operations and other 49.6
-----------
Consolidated Net Income - GAAP Basis $ 360.0
===========
* net of intercompany dividends
- 22 -
SCHEDULE III
Aon Corporation and Subsidiaries
SUPPLEMENTARY INSURANCE INFORMATION
Future Benefit, Amort-
policy Unearned claims, ization
benefits, premiums losses deferred
Deferred losses, and other Net Commis- and policy Other
policy claims policy- invest- sions settle- acqui- oper-
acquisition and loss holders Premium ment fees ment sition ating Premiums
costs(1) expenses funds revenue income(2) & other expenses costs(1) expenses written(3)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(millions)
Year ended
December 31, 1996
Insurance brokerage
and consulting
services ............... $ -- $ -- $ -- $ -- $ 83.5 $1,918.8 $ -- $ -- $1,820.2 $ --
Insurance underwriting ... 598.8 1,920.3 2,439.3 1,526.7 197.0 50.1 789.5 207.9 524.1 1,581.6
Corporate and
other .................. -- -- -- -- 103.5 8.6 -- -- 100.9 --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total ............... $ 598.8 $1,920.3 $2,439.3 $1,526.7 $ 384.0 $1,977.5 $ 789.5 $ 207.9 $2,445.2 $1,581.6
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Year ended
December 31, 1995 (4)
Insurance brokerage
and consulting
services ............... $ -- $ -- $ -- $ -- $ 75.7 $1,651.3 $ -- $ -- $1,515.1 $ --
Insurance underwriting ... 1,348.7 2,446.0 7,110.4 1,426.5 168.5 44.9 698.5 207.5 487.5 1,596.2
Corporate and
other .................. -- -- -- -- 85.2 13.6 -- -- 99.1 --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total ............... $1,348.7 $2,446.0 $7,110.4 $1,426.5 $ 329.4 $1,709.8 $ 698.5 $ 207.5 $2,101.7 $1,596.2
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Year ended
December 31, 1994 (4)
Insurance brokerage
and consulting
services ............... $ -- $ -- $ -- $ -- $ 47.7 $1,388.7 $ -- $ -- $1,279.0 $ --
Insurance underwriting ... 1,290.6 2,378.7 6,931.7 1,322.3 142.3 44.9 626.2 189.7 458.3 1,478.2
Corporate and
other .................. -- -- -- -- 67.1 28.2 -- -- 91.0 --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total ............... $1,290.6 $2,378.7 $6,931.7 $1,322.3 $ 257.1 $1,461.8 $ 626.2 $ 189.7 1,828.3 $1,478.2
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
(1) Includes cost of insurance purchased.
(2) The above results reflect allocations of investment income and certain
expense elements considered reasonable under the circumstances.
(3) Net of reinsurance ceded.
(4) Reclassified to conform to the 1996 presentation.
- 23 -
SCHEDULE IV
Aon Corporation and Subsidiaries
REINSURANCE
Year Ended December 31, 1996
-------------------------------------------------------------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
(millions) amount companies companies amount net
----------- ----------- ----------- ----------- -----------
Life insurance in force (1) ............................... $ 10,996.7 $ 12,749.8 $ 10,304.1 $ 8,551.0 120.5%
=========== =========== =========== =========== ===========
Premiums and policy fees
Life Insurance .......................................... $ 206.5 $ 133.0 $ 87.7 $ 161.2 54.4%
A&H Insurance ........................................... 1,045.3 213.9 112.7 944.1 11.9
Specialty Property & Casualty (2) ....................... 490.3 160.8 91.9 421.4 21.8
----------- ----------- ----------- ----------- -----------
Total premiums and policy fees ............................ $ 1,742.1 $ 507.7 $ 292.3 $ 1,526.7 19.1%
=========== =========== =========== =========== ===========
Year Ended December 31, 1995
-------------------------------------------------------------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
(millions) amount companies companies amount net
----------- ----------- ----------- ----------- -----------
Life insurance in force (1) ............................... $ 80,176.6 $ 27,936.6 $ 991.4 $ 53,231.4 1.9%
=========== =========== =========== =========== ===========
Premiums and policy fees
Life Insurance .......................................... $ 251.9 $ 83.9 $ 4.0 $ 172.0 2.3%
A&H Insurance ........................................... 1,032.9 98.5 5.1 939.5 0.5
Specialty Property & Casualty (2) ....................... 375.0 133.9 73.9 315.0 23.5
----------- ----------- ----------- ----------- -----------
Total premiums and policy fees ............................ $ 1,659.8 $ 316.3 $ 83.0 $ 1,426.5 5.8%
=========== =========== =========== =========== ===========
Year Ended December 31, 1994
-------------------------------------------------------------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
(millions) amount companies companies amount net
----------- ----------- ----------- ----------- -----------
Life insurance in force (1) ............................... $ 74,047.9 $ 25,109.7 $ 1,173.9 $ 50,112.1 2.3%
=========== =========== =========== =========== ===========
Premiums and policy fees
Life Insurance .......................................... $ 245.0 $ 81.7 $ 5.1 $ 168.4 3.0%
A&H Insurance ........................................... 996.2 98.6 6.4 904.0 0.7
Specialty Property & Casualty (2) ....................... 309.9 139.1 79.1 249.9 31.7
----------- ----------- ----------- ----------- -----------
Total premiums and policy fees ... ........................ $ 1,551.1 $ 319.4 $ 90.6 $ 1,322.3 6.9%
=========== =========== =========== =========== ===========
(1) Includes credit life insurance.
(2) Includes mechanical repair insurance sold through automobile dealers,
appliance warranty insurance and property liability insurance.
- 24 -
SCHEDULE V
Aon CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
(millions) Additions
----------------------
Charged/
Balance at Charged to (credited) Balance
beginning cost and to other Deductions at end
Description of year expenses accounts (1) of year
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
- ----------------------------
Reserve for losses (2)
(deducted from mortgage loans on real estate) $ 25.6 $ -- $ (24.9) $ -- $ 0.7
Reserve for losses
(deducted from other long-term investments) 5.2 -- -- -- 5.2
Allowance for doubtful accounts (4)
(deducted from insurance brokerage and consulting
services receivables) 47.4 9.5 13.4 (10.5) 59.9
Allowance for doubtful accounts (2)
(deducted from premiums and other) 3.9 2.1 (2.9) -- 3.1
Year Ended December 31, 1995
- ----------------------------
Reserve for losses (3)
(deducted from mortgage loans on real estate) $ 29.7 $ -- $ (4.1) $ -- $ 25.6
Reserve for losses (3)
(deducted from other long-term investments) 6.7 -- 1.0 (2.5) 5.2
Allowance for doubtful accounts
(deducted from insurance brokerage and consulting
services receivables) 45.2 6.0 -- (3.8) 47.4
Allowance for doubtful accounts
(deducted from premiums and other) 3.2 2.0 -- (1.3) 3.9
Year Ended December 31, 1994
- ----------------------------
Reserve for losses (3)
(deducted from mortgage loans on real estate) $ 42.0 $ -- $ (12.3) $ -- $ 29.7
Reserve for losses
(deducted from long-term bonds) 11.7 -- -- (11.7) --
Reserve for losses (3)
(deducted from other long-term investments) 9.3 -- (2.6) -- 6.7
Allowance for doubtful accounts (4)
(deducted from insurance brokerage and consulting
services receivables) 41.2 7.0 1.3 (4.3) 45.2
Allowance for doubtful accounts
(deducted from premiums and other) 3.1 1.4 -- (1.3) 3.2
(1) Amounts deemed to be uncollectible.
(2) Amounts shown in additions credited to other accounts primarily represent
reduction due to sale of discontinued operations.
(3) Amounts shown in additions charged/(credited) to other accounts represent
realized investment (gains)/losses.
(4) Amounts shown in additions charged to other accounts represent reserves
related to acquired business.
- 25 -
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 1996
("Annual Report")pages 6 through
15.
Item 3. Legal Proceedings Annual Report page 40 (note 12 of
Notes to Consolidated Financial
Statements).
Part II
Item 5. Market for the Registrant's Annual Report pages 34 and 35
Common Stock and Related (note 8 of Notes to Consolidated
Security Holder Matters Financial Statements) and page 43
("Dividends paid per share" and
"Price range").
Item 6. Selected Financial Data Annual Report page 42.
Item 7. Management's Discussion and Annual Report pages 17 through
Analysis of Financial Condition 23.
and Results of Operations
Item 8. Financial Statements and Annual Report pages 24 through 41
Supplementary Data and 43.
Part III
Item 10. Directors and Executive Officers Notice of Annual Meeting of
of the Registrant Holders of Common Stock and
Series C Preferred Stock and
Proxy Statement For Annual
Meeting of Stockholders on April
18, 1997 of the Registrant
("Proxy Statement") pages 3 and
7.
Item 11. Executive Compensation Proxy Statement pages 12 through
15.
Item 12. Security Ownership of Certain Proxy Statement pages 2, 8 and 9.
Beneficial Owners and Management
Item 13. Certain Relationships and Proxy Statement page 20
Related Transactions ("Transactions With Management").
Part IV
Item 14. Exhibits, Financial Statement Annual Report pages 24 through
Schedules, and Reports on 41.
Form 8-K
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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 8% Cumulative
Perpetual Preferred Stock, $1.00 par value -- incorporated by
reference to Exhibit 4(a) to the Third Quarter 1992 Form 10-Q.
(e) Certificate of Designation for the Registrant's Series C
Cumulative Preferred Stock -- incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K
dated February 9, 1994.
(4) Instruments defining the rights of security holders, including
indentures:
(a) Indenture dated September 15, 1992 between the Registrant and
Continental Bank Corporation (now known as Bank of America
Illinois), as Trustee -- incorporated by reference to Exhibit
4(a) of the Registrant's Current Report on Form 8-K dated
September 23, 1992.
(b) Resolutions establishing terms of 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.
(10) Material Contracts:
(a) Aon Stock Option Plan -- incorporated by reference to Exhibit
10(a) to the 1990 Form 10-K.
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EXHIBIT INDEX
Exhibit Number Page Number of
Regulation Sequentially
S-K, Item 601 Numbered Copy
- ------------- -------------
(b) First Amendment to Aon Stock Option Plan -- incorporated by
reference to the Exhibit 10(a) to the Second Quarter 1994 Form
10-Q.
(c) Second Amendment to Aon Stock Option Plan -- incorporated by
reference to Exhibit 10(c) to the Second Quarter 1994 Form
10-Q.
(d) Ryan Insurance Group, Inc. Stock Option Plan together with
Stock Option Assumption Agreement providing for amendment of
the plan -- incorporated by reference to Exhibit 4(b) to the
Registration Statement No. 2-79114 on Form S-8.
(e) 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.
(f) 1994 Restatement of Aon Savings Plan -- incorporated by
reference to Exhibit 10(f) to the 1994 Form 10-K.
(g) 1994 Restatement of Aon Employee Stock Ownership Plan --
incorporated by reference to Exhibit 10(g) to the 1994 Form
10-K.
(h) 1994 Restatement of Aon Pension Plan -- incorporated by
reference to Exhibit 10(h) to the 1994 Form 10-K.
(i) Deferred Compensation Agreement by and among Registrant and
Registrant's directors who are not salaried employees of
Registrant or Registrant's affiliates -- incorporated by
reference to Exhibit 10(i) to the 1987 Form 10-K.
(j) Aon Stock Award Plan, as amended -- incorporated by reference
to Exhibit 10(a) to the First Quarter 1994 Form 10-Q.
(k) 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.
(l) 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.
(m) 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.
(n) First Amendment to the Aon Stock Award Plan -- incorporated by
reference to Exhibit 10(b) to the Second Quarter 1994 Form
10-Q.
- 28 -
EXHIBIT INDEX
Exhibit Number Page Number of
Regulation Sequentially
S-K, Item 601 Numbered Copy
- ------------- -------------
(o) Second Amendment to Aon Stock Award Plan -- incorporated by
reference to Exhibit 10(d) to the Second Quarter 1994 Form
10-Q.
(p) Aon Corporation 1995 Senior Officer Incentive Compensation
Plan -- incorporated by reference to Exhibit 10(p) to the 1995
Form 10-K.
(q) 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.
(r) 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.
(s) 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.
(t) 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.
(u) 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.
(v) 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.
(w) Second Amendment to Aon Employee Stock Option Plan -
incorporated by reference to Exhibit 10(a) to the Second
Quarter 1996 Form 10-Q.
(x) Fifth Amendment to Aon Pension Plan - incorporated by
reference to Exhibit 10(b) to the Second Quarter 1996 Form
10-Q.
(y) Third Amendment to Aon Savings Plan - incorporated by
reference to Exhibit 10(c) to the Second Quarter 1996 Form
10-Q.
(z) Third Amendment ot Aon Pension Plan - incorporated by
reference to Exhibit 10(d) to Second Quarter 1996 Form 10-Q.
- 29 -
EXHIBIT INDEX
Exhibit Number Page Number of
Regulation Sequentially
S-K, Item 601 Numbered Copy
- ------------- -------------
(a)(a) Share Purchase Agreement between the Registrant and Inchape
plc dated 15 October 1996(to be filed by amendment to this
form 10-K).
(11) Statement regarding Computation of Per Share Earnings.
(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, 1996 (for information, and not to be deemed filed, except
for those portions specifically incorporated by reference herein).
(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 1996
Annual Report to Stockholders and into Aon's Registration Statement
Nos. 33-27984, 33-42575, 33-57562, 33-59037 and 333-21237.
(99) Annual Report to the Securities and Exchange Commission on Form 11-K
for the Aon Savings Plan for the year ended December 31, 1996 -- to be
filed by amendment as provided in Rule 15d-21(b).
- 30 -