CHICAGO, Oct. 24 /PRNewswire-FirstCall/ -- The countrywide prospective return on equity for the Homeowners line of insurance for 2007 is 7.0 percent, up from 5.4 percent in 2006, according to an analysis by Aon Re Global, a unit of Aon Corporation (NYSE: AOC - News). The year-over-year improvement in prospective ROE is due to marginally more adequate homeowners insurance rates than in 2006 and an expected lower cost of reinsurance, the analysis found.

The update for 2007 -- the sixth year Aon Re has undertaken this study -- is based on a review of the rate filings of the top five companies in states making up more than 80 percent of the U.S. population. The study looks at prospective return on equity by state.

As in 2006, a significant difference in prospective ROE is found between "hurricane states" and "non-hurricane states" -- at 5.4 percent versus 8.7 percent respectively.

"Our assignment of capital by state is based on retained risk by state," said Randall E. Brubaker, senior vice president and actuary at Aon Re Services. "We continue to find that approved rates in hurricane states in general do not adequately reflect the level of risk and capital requirements derived from operating in these states."

The continuing reductions of policies in force by insurance companies in the hurricane states and the growth of state-sponsored residual markets is driven in part by the lower prospective ROE in these states.

"We see the market share of public entities growing in the hurricane states," said Kenneth Selzer, executive vice president at Aon Re Global. "Aon Re is working to serve both private insurers and the public entities to make efficient use of capital in this changing operating environment."

About the Homeowners ROE analysis

Aon Re's Homeowners ROE analysis is based on capital requirements and cost of reinsurance for an assumed company that operates countrywide with combined equity capital and reinsurance sufficient for an expected "A" rating by A. M. Best. The results of the study are indicative of industry trends, but do not reflect the actual capital structure, reinsurance, geographic distribution or specific rate needs of an individual company. Aon Re Services assists its clients by applying the methodologies in the study to the particular unique situation and needs of any client.

About Aon

Aon Re Global, the world's leading and most preferred reinsurance intermediary, provides clients with integrated capital solutions and services through a world-class network of experts in more than 35 countries. Clients are better able to differentiate and meet their business objectives with Aon Re Global's best-in-class treaty and facultative reinsurance placement services, capital markets expertise, and relevant analytics and technical expertise, including catastrophe management, actuarial, and rating agency counsel. Aon Re Global was named best reinsurance broker in 2007 and 2006 by readers of Business Insurance, in 2007 by readers of US Insurer and in 2006 by readers of Reinsurance.

Aon Corporation (NYSE: AOC - News) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. Through its 43,000 professionals worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was ranked by A.M. Best as the number one global insurance brokerage in 2007 based on brokerage revenues, and voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com.

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Source: Aon Re Global

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