Aon Corp. (AON) announced first-quarter adjusted operating earnings (excluding non-recurring items) of 83 cents per share, which came in a couple of pennies ahead of the Zacks Consensus Estimate at 81 cents while substantially surpassing the 75 cents recorded in the prior-year quarter. Despite considerable volatility due to ongoing market challenges and a 48% year-over-year decline in investment income; AON’s operating improvement, risk management and margin expansion were impressive during the quarter.

However, net income attributable to stockholders decreased 36.4% to $178 million or 63 cents per share, compared to $280 million or 96 cents per share for the prior-year quarter.

AON’s total revenue increased 3% year over year to $1.9 billion, primarily due to a 6% increase in foreign currency translation and a 1% increase from acquisitions, partially offset by a 48% decline in investment income and 3% decline in organic revenue.

In Risk and Insurance Brokerage Services, total revenue for the reported quarter increased 3% year over year to $1.6 billion, affected by a 3% decline in organic revenue. In the Consulting segment, total revenue increased 4% year over year to $322 million, affected by a 1% decline in organic revenue.

Total operating expenses increased 10% to $1.6 billion, reflecting an estimated $92 million unfavorable impact from foreign currency translation and a $33 million increase in restructuring related expenses, partially offset by benefits related to the 2007 and AON Benfield restructuring programs.

Foreign currency translation increased net income by 4 cents per share, compared to the prior-year quarter, at current quarter foreign exchange rates. Effective tax rate on continuing operations decreased to 24.9% from 31.5% in the prior-year quarter.

Restructuring Plan

AON’s savings in the reported quarter, related to the 2007 restructuring program, are estimated at $110 million, compared to $41 million in the prior year quarter. Of the estimated restructuring savings in the reported quarter, $92 million were related to the Brokerage segment, primarily from workforce reduction. Before any potential reinvestment of savings, the 2007 restructuring program is now expected to deliver $536 million of annualized run-rate cost savings by the end of 2010, primarily as a result of additional cost savings opportunities to streamline support functions globally.

Restructuring savings in the reported quarter related to the AON Benfield restructuring program are estimated at $22 million. Before any potential reinvestment of savings, the Benfield restructuring program is expected to deliver cumulative cost savings of $90-100 million in 2010 and $122 million in 2011.

Restructuring expenses during the reported quarter was $76 million, as compared with $43 million in the prior-year quarter.

Share Repurchase Program

During the quarter, AON repurchased 1.2 million shares of common stock for $50 million. The company has approximately $215 million remaining under the existing share repurchase program previously authorized in 2005 and $2 billion under the share repurchase program previously authorized in Jan 2010.

AON anticipates an effective tax rate on net income from continuing operations of 28% for 2010.

Business Update

On Mar 19, 2010, AON announced a definitive agreement to acquire J.P. Morgan Compensation and Benefit Strategies, a division of J.P. Morgan Retirement Plan Services LLC. Although the financial terms of the deal remained undisclosed, the deal was successfully completed on Mar 31, 2010.

Dividend Update

On Apr 21, the Board of AON declared a quarterly cash dividend of 15 cents per share, which is payable on May 17, 2010 to shareholders of record as of May 3, 2010.

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