Aon Corporation announced April 20 it was spinning off its underwriting businesses for its common stockholders, forming two separate, publicly traded companies in the process.
The spin-off will take the shape of a tax-free stock dividend to Aon’s common stockholders, provided Aon’s Board of Directors and the Internal Revenue Service rule favorably.
“The spin-off of our underwriting businesses is the next logical step in Aon’s evolution as a client-centric company,” AON Chairman and CEO Patrick Ryan commented in a media release. “Through Aon’s leadership, the major consideration phase of the global insurance brokerage industry is now complete. The successful implementation of our business transformation program will result in greater efficiency, enhanced productivity and better service.”
Aon’s combined operating segments posted solid results for the quarter, according to Ryan. “Equity market volatility negatively impacted our non-operating corporate segment revenue, however, due primarily to limited partnership valuation declines.”
Aon’s business transformation plan remains on track to hit financial goals which had been targeted for November 2000, with annual savings from the plan pinpointed at between $150 million to $200 million. The main portion of the annualized savings will start to be realized beginning in fourth quarter 2001.
Total pretax costs related to the business transformation were estimated at between $250 million and $325 million.
As part of the conversion from a geographic model to a more client-focused organization structure, Aon will center its four primary U.S. retail brokerage processing centers in Houston, Los Angeles, New York City, and Glenview, Ill. Centralized U.S. processing locales also have been planned for other groups, including affinity, wholesale, managing underwriting, claims services, premium accounting and broad market personal lines.
Soon after Aon’s announcement, Standard & Poor’s (S&P) placed its ratings on Aon Corp. and related subsidiaries on Credit Watch with negative implications. The underwriting businesses, which would be affected by this move include Combined Insurance Co. of America, Combined Life Insurance Co. of NY, Virginia Surety Co. Inc., London General Insurance Co., and Aon Warranty Group Inc.
Aon, a Fortune 500 company, specializes in insurance brokerage, risk management products and consulting, personal lines, warranties, and human resources services and consulting. With offices in more than 120 countries, Aon Corporation had 1999 annual revenue close to $7.1 billion.