Insurance brokerage Aon Corp., faced by fierce competition and falling rates, said Wednesday it will cut 2,700 jobs as part of a restructuring plan that will eventually save it about $240 million a year.
The elimination of about 6 percent of its work force was announced as Aon reported third-quarter net earnings of $204 million, up 92 percent from a year earlier. But the industry has been struggling to cope with three straight years of sinking insurance rates.
Aon, which will record related pretax charges of about $360 million for the restructuring, said it needed to slash expenses.
The job cuts will be mostly in back-office operations, with about 1,100 expected to be “off-shored or outsourced,” Aon said. It will include consolidation of its human resources, finance and information technology divisions.
Aon will also combine European operations on a country-by-country basis.
“This restructuring plan has a similar approach to that of our 2005 restructuring plan, which has had very positive results,” Greg Case, Aon’s president and chief executive, said in a statement. “We are continuing efforts to simplify our complex organization, and eliminate expense that does not contribute directly to our ability to efficiently deliver value-added products and services to our clients.”
The restructuring will likely lead to savings between $50 million and $70 million in 2008, $175 million and $200 million in 2009, and $240 million in annualized savings by 2010, the company said.
It said it already was on track to realize annual savings of about $280 million by next year from its previous, three-year restructuring.
Aon’s third-quarter earnings amounted to 64 cents per share, compared with $106 million, or 32 cents per share, for the same period in 2006.
Revenue rose 11 percent to $2.41 billion from $2.17 billion, well above the $2.26 billion that analysts expected. Organic growth alone, which doesn’t count recent acquisitions and divestitures and currency fluctuations, increased 6 percent from a year earlier.
Risk and insurance brokerage services provided the bulk of quarterly revenue. The division’s revenue increased to $1.44 billion, from $1.34 billion during the same quarter last year. Within the division, revenue in the U.K. increased 15 percent to $207 million. The rest of Europe, the Middle East and Africa provided $275 million in revenue.
Risk and insurance brokerage services in the Americas totaled $582 million, a 3 percent gain from the prior year. The majority of that growth came through the retail channel.