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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

Commission file number 1-7933

Aon Corporation
(Exact Name of Registrant as Specified in its Charter)

        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 ý    NO o

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES ý    NO o

        Number of shares of common stock outstanding:

Part 1
Financial Information

Aon Corporation

Condensed Consolidated Statements of Financial Position

See the accompanying notes to the condensed consolidated financial statements.

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Aon Corporation

Condensed Consolidated Statements of Income

(Unaudited)

See the accompanying notes to the condensed consolidated financial statements.

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Aon CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See the accompanying notes to condensed consolidated financial statements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.     Statement of Accounting Principles

        The financial results included in this report are stated in conformity with accounting principles generally accepted in the United States and are unaudited but include all normal recurring adjustments which the Registrant (Aon) considers necessary for a fair presentation of the results for such periods. These interim figures are not necessarily indicative of results for a full year as further discussed below.

        Refer to the consolidated financial statements and notes in the Annual Report on Form 10-K for the year ended December 31, 2002 for additional details of Aon's financial position, as well as a description of the accounting policies which have been continued without material change.

        Certain amounts in the 2002 condensed consolidated financial statements relating to segments and discontinued operations have been reclassified to conform to the 2003 presentation.

Stock Compensation Plans

        Aon applies Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related Interpretations in accounting for its stock-based compensation plans. Accordingly, no compensation expense has been recognized for its stock option plan as the exercise price of the options equaled the market price of the stock at the date of grant. Compensation expense has been recognized for stock awards based on the market price at the date of the award.

        The following table illustrates the effect on net income and earnings per share if Aon had applied the fair value recognition provision of Financial Accounting Standards Board (FASB) Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

        The pro forma information reflected above may not be representative of the amounts to be expected in future years as the fair value method of accounting contained in FASB Statement No. 123 has not been applied to options and awards granted prior to January 1995.

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Endurance Warrants and Common Stock Investment

        In December 2001, Aon's underwriting subsidiaries invested $227 million in Endurance Specialty Holdings, Ltd., formerly known as Endurance Specialty Insurance Ltd. (Endurance), a Bermuda-based insurance and reinsurance company formed to provide additional underwriting capacity to commercial property and casualty insurance and reinsurance clients. As of September 30, 2003, Aon's common stock investment in Endurance was $289 million, representing approximately 11.4 million shares. In conjunction with this common stock investment, Aon's underwriting subsidiaries also received approximately 4 million stock purchase warrants which allow Aon to purchase additional Endurance common stock through December 2011. These warrants meet the definition of a derivative as described in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which requires them to be recorded in the financial statements at fair value, with changes in fair value recognized in earnings on a current basis.

        Through December 31, 2002, these warrants had been carried at fair value, which approximated their original cost. Fair value had been estimated, taking into consideration the original cost, subjectivity in determining the value of the underlying shares since Endurance was not yet publicly traded, illiquidity of the underlying shares, recent capital transactions in 2002 between Endurance and its shareholders for the warrants, and the general uncertainty regarding the ability of Endurance to access the public markets.

        In first quarter 2003, Endurance completed its initial public offering, which provided a market value for the underlying shares and removed much of the uncertainty regarding the fair value of Endurance and the warrants. With the assistance of an independent third party, Aon has valued the warrants using the Black-Scholes pricing model and has determined that the warrants had a fair value of approximately $64 million as of September 30, 2003, a decrease of $2 million pretax from June 30, 2003.

        The valuation assumptions used in the model at September 30, 2003 were as follows:

        The model assumes: the warrants are "European-style," which means that they are valued as if the exercise can only occur on the expiration date; the spot and exercise prices are reduced by expected future dividends; and the dividend remains unchanged during the period the warrants are outstanding.

        The $64 million (pretax) year-to-date increase and $2 million (pretax) quarterly decrease in value was recognized as investment income in the Corporate and Other segment. The future value of the warrants may vary considerably from the value at September 30, 2003 due to the inherent volatility of the underlying shares, as well as the passage of time and changes in other factors that are employed in the valuation model.

2.     Accounting and Disclosure Changes

        In June 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Statement No. 146 supercedes Emerging Issues Task Force (EITF) Issue No. 94-3,

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Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). Statement No. 146 was effective January 1, 2003. This Statement did not have a material impact on Aon's consolidated financial statements.

        In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). Guarantees meeting the characteristics described in FIN 45 are required to be initially recorded at fair value, which is different from the general current practice of recording a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement No. 5, Accounting for Contingencies. FIN 45's disclosure requirements are applicable for each guarantee, or each group of similar guarantees, even if the likelihood of the guarantor having to make payments is remote.

        FIN 45's disclosure requirements were effective for financial statements ending after December 15, 2002. FIN 45's initial recognition and initial measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. Implementation of this Interpretation did not have a material impact on Aon's consolidated financial statements.

        In December 2002, the FASB issued Statement No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Statement No. 148 amends Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to Statement No. 123's fair value method of accounting for stock-based employee compensation. Statement No. 148 also amends the disclosure provisions of Statement No. 123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements.

        Aon adopted the disclosure requirements of Statement No. 148 effective with its 2002 Annual Report. Aon is evaluating its position regarding its accounting for stock-based compensation based on recent FASB initiatives.

        In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). This Interpretation clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 identifies circumstances in which the consolidation decision should be based on voting interests and other circumstances in which the consolidation decision should be based on variable interests.

        The provisions of FIN 46 are effective for variable interest entities created after January 31, 2003, and were to be effective for variable interest entities existing prior to that date beginning July 1, 2003. On October 9, 2003, the FASB issued Staff Position 46-6, deferring the effective date for applying the provisions of FIN 46 for variable interest entities created before February 1, 2003 until the end of the fourth quarter 2003. Aon Capital A, a wholly-owned statutory business trust which issued the Capital Securities (see below and footnote 10), may need to be deconsolidated because Aon believes that it is not the primary beneficiary as defined in FIN 46. As a result, Aon may be required to reflect, as a liability on its balance sheet, its 8.205% Junior Subordinated Deferrable Interest Debentures due to Aon Capital A.

        The Company continues to evaluate the impact that FIN 46 will have on its consolidated financial statements. The evaluation process is complex and there is limited implementation guidance available.

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The adoption of FIN 46 is not expected to have a material effect on Aon's consolidated stockholders' equity or net income.

        In April 2003, the FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. The intent of this Statement is more consistent reporting of contracts as either freestanding derivative instruments subject to Statement No. 133 in its entirety, or as hybrid instruments with debt host contracts and embedded derivative features. Statement No. 149 amends Statement No. 133 as a result of (1) decisions previously made as part of the Derivatives Implementation Group (DIG) process, (2) changes made in connection with other FASB projects dealing with financial instruments, and (3) deliberations in connection with issues raised in relation to the application of the definition of a derivative.

        Statement No. 149 is effective for contracts entered into or modified after June 30, 2003, and hedging relationships designated after June 30, 2003. Provisions of Statement No. 149 that represent the codification of previous DIG decisions are already effective. This Statement did not have a material impact on Aon's consolidated financial statements.

        In May 2003, the FASB issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity.

        Statement No. 150 must be applied immediately to instruments entered into or modified after May 15, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. On October 29, 2003, the FASB indefinitely deferred the application of certain portions of Statement No. 150. As a result, Aon will not reclassify to liabilities its Company-Obligated Mandatorily Redeemable Preferred Capital Securities of Subsidiary Trust Holding Solely the Company's Junior Subordinated Debentures (Capital Securities—$702 million) or the minority interest related to these securities in third quarter 2003. Based on additional analysis and interpretation of Statement No. 150, it was also determined that Aon's Redeemable Preferred Stock ($50 million) does not qualify as a liability under Statement No. 150 and should not be reclassified.

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3.     Income Per Share

        Income per share is calculated as follows: