Total quarterly revenues for Aon fell to $2.51 billion, down 2 percent from $2.56 billion. Revenues for the Risk and Insurance Brokerage Services unit dropped 4 percent to $1.4 billion, with organic revenue declining 5 percent. The lackluster revenue growth can be mainly attributed to softening property-casualty insurance rates as well as the elimination of the controversial contingent fees, Aon noted.

The impact of abandoning contingent fees, however, appears to be much smaller for Aon when compared with its bigger rival Marsh. Aon reported it received $12 million in contingent fees for the 2005 first quarter, down from $35 million one year ago--as the firm took in fees trickling in from expiring contingent agreements. Aon abandoned all its contingent arrangements at the end of 2004.

The elimination of contingent fees seemed to have a bigger impact on Marsh as such fees made up a bigger percentage of Marsh's overall income last year. Marsh reported last week that it received $32 million from expiring contingent agreements for its first quarter, compared to $179 million it received one year ago.

Commenting further on Aon's expense-cutting efforts, Mr. Case noted that Aon cut its expenses by 5 percent to $2.19 billion from $2.26 billion one year ago, by selling its claims-services business, changing employee incentive compensations--aligning compensations more closely with performances--and cutting staff.

"During the quarter, we continued our efforts to keep costs under control," Mr. Case said. "The organic growth was a little disappointing, but the margins were extremely good."

Aon's other business units also performed well. The firm's consulting revenue rose 3 percent to $309 million, while the insurance underwriting revenue (both health and life, and warranty, credit and p-c) rose 1 percent to $789 million, further bolstering Aon's bottom line. Total investment income also improved, up 15 percent to $93 million from $81 last year.

Aon's results seemed to top many analysts' expectations. Nick Pirsos, an insurance analyst at New York-based research firm Sandler O'Neill, said the firm's quarterly performance was good and "clearly better than expected from analysts' standards."

He added that, "Revenues did decline in line with what we were expecting in the current environment, but the expense reductions were greater than expected and they more than offset revenue decline."