NEW YORK (Reuters) - Aon Corp, the largest global insurance brokerage by assets, said fourth-quarter net income fell sharply on restructuring and acquisition costs, but margins improved and earnings before special items beat Wall Street expectations, sending Aon shares up 11 percent.

Atlantic Equities analyst Alan Devlin credited Aon for being able to stay a step ahead of rising costs despite tough economic conditions. "The earnings surprise came on margins" in its brokerage and consulting units, he said. Net earnings fell 95 percent to $10 million, or three cents a share, from $207 million, or 64 cents a share, a year earlier.

Earnings from continuing operations, excluding certain items, rose 19 percent to 81 cents a share. Revenue slipped four percent to $1.9 billion, largely because of foreign currency translation.

Analysts, on average, had expected earnings from continuing operations of 79 cents a share on revenue of $2.06 billion.

Risk and insurance brokerage revenue, which accounts for roughly 80 percent of total revenue, was three percent lower, and consulting revenue fell eight percent.

Aon, which competes Aon, which competes with Marsh & McLennan Cos. Inc. in helping businesses find insurance, said expenses were one percent higher at $1.8 billion.

The company has been streamlining its business to boost savings since 2005, when an industrywide probe led big brokerages to drop lucrative commissions they had received from insurers they sent business to.

Through two rounds of restructuring, Aon has cut thousands of jobs and moved some operations to lower-cost regions.

The company is now tightening its belt a bit more as it grapples with higher pension costs and lower interest rates eating into investment income. Last week it decided to freeze its US defined benefit plan as of April 1, which will help contain costs.

"We are making tough decisions around expenses as we further streamline our costs," chief financial officer Christa Davies said on a call with investors.

In an interview, Ms Davies told Reuters that Aon had raised its target for annual savings by $70 million to $370 million by 2010, which she cited as a reaction to "global market turmoil".

Aon closed its acquisition of reinsurance broker Benfield last November, creating the world's biggest reinsurance brokerage. The deal added $38 million to Aon's revenue in the fourth quarter but also added $42 million in expenses, shaving about a penny off per-share profit.

Davies said the deal was meeting financial expectations. Previously, Aon projected significant savings by 2011.

Shares of Chicago-based Aon were up $4.17 (11.4 percent) to $40.62 in New York Stock Exchange on Friday.