DOW JONES NEWSWIRES
Aon Corp.'s (AOC) fourth-quarter net income plunged 95% on an
expected $116 million loss related to plans to dispose of its
property- and casualty-insurance operations, and higher
restructuring costs.
The insurance brokerage's chief executive, Greg Case, said the
company had solid results despite the soft market and was
well-positioned for 2009.
In general, as catastrophes continue to run below long-term
averages, insurance brokerages have been grappling with how to
price policies low enough to attract customers less concerned with
risk. The resulting price wars have been taking a toll on
insurers.
Fitch Ratings last month projected profitability for insurance
brokerages to be flat to modestly lower this year as the economic
turbulence challenges growth and pinches margins.
Aon, one of the world's largest insurance brokerages, posted net
income of $10 million, or 3 cents a share, down from $207 million,
or 64 cents a share, a year earlier. Last year's results included
$34 million in restructuring charges. Excluding items, earnings per
share rose to 81 cents from 68 cents.
Earnings include results from Benfield Group Inc. since the
close of Aon's purchase Nov. 28.
Revenue decreased 4.1% to $1.92 billion amid the effects of a
stronger dollar.
On average, analysts surveyed by Thomson Reuters expected
earnings of 78 cents on revenue of $2.06 billion.
Organic revenue, a closely watched indicator that excludes
recent acquisitions and divestitures as well as currency
fluctuations, rose 2%.
At Aon's largest unit, risk and insurance brokerage services,
organic revenue rose 2%. The segment's profit slid 21% amid a 14%
decline in investment income.
Organic revenue in the consulting business rose 3%, while
earnings slid 8.3%, on lower compensation and health and benefits
consulting.
In the latest quarter, restructuring costs more than doubled to
$87 million from a year earlier.
The company again boosted its estimate for how much it would
save through its restructuring plan to $240 million to $260 million
this year and $370 million in 2010.
Aon has been undergoing major restructuring for more than a
year, including job cuts and sales of some of its businesses. Last
month, Aon completed the sale its Auto Insurance Specialists Inc.
network.
As part of its plan to boost the reach of its reinsurance
operations, Aon bought U.K. reinsurance broker Benfield Group Ltd.
for $1.51 billion. It planned to cut 500 to 700 jobs as part of the
combination.
The deal marked a major consolidation in the reinsurance broker
market, where intermediaries arrange cover for insurers for risks
that are too big to keep on their own balance sheet. It was the
latest round of consolidation in the sector, after U.K.-based
Willis Group Holdings Ltd. (WSH) agreed to buy Hilb Rogal &
Hobbs Co. of the U.S. in June.
Aon's shares closed Thursday at $36.45 and haven't traded
premarket. The stock is off 20% so far this year.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com