Aon negative rating revised to stable

Aon Corp.’s outlook has been revised from negative to stable, according to Standard & Poor’s Rating Service, which has also affirmed its ‘BBB+/A-2’ counterparty credit rating on Aon. S&P credit analyst Steven Ader says the outlook on Aon has been revised because predictions indicate that the Copmpany will "continue to be successful in implementing its revised business model.” Ader explains that the model addresses the elimination of contingent-commission revenue, which had represented 15% of the Company’s consolidated pretax income in 2004.The rating action on Aon takes into account, the reduced potential that regulatory investigations may trigger allegations that will materially affect Aon’s competitive or financial condition. A favorable debt-maturity schedule and credit facilities incorporating a waiver of the material adverse condition clause for previously disclosed have boosted strong liquidity, thus further enhancing the improved rating. Expense-control initiatives, the preliminary success in leveraging of its very strong competitive position and the continued reduction of financial leverage from historical levels have proactively implemented a revised business and financial model addressing the elimination of Aon’s contingent-commission revenue. Evidence for this is indicated in the materially improved performance of the Company’s core risk and insurance brokering service segment. The pretax performance of this segment for the three months ended June 30, 2005, improved to $231 million (a 16.5% ROR) from $213 million (a 14.9% ROR) in the prior year period. This improvement was driven primarily by expense initiatives (brokerage revenue declined by 3%). However, the improved leveraging of Aon’s strong international presence resulted in organic growth, which had been a weakness in recent years, materially improving relative to Aon’s peers. S&P’s says it expects the continued success of expense initiatives, improved organic growth relative to the company’s global peers and the improved balance between operating performance and adjusted financial leverage will continue to materially reduce the adverse financial impact of the loss of contingent commission revenue and the adverse revenue impact of declining property/casualty premium for which a material proportion of Aon’s core risk and insurance brokerage segment revenues are based. According to S&P’s, If Aon–in combination with the continued diminishment of regulatory risk–is able to materially improve its financial profile in terms of earnings and organic growth, adjusted financial leverage, and adjusted fixed-charge coverage, S&P’s says it will consider revising the outlook to positive. Conversely, if the current financial profile deteriorates or if Aon experiences an adverse change to their competitive or financial profile as a result of regulatory investigations, S&P’s will actively weigh a negative rating action.