Aon Corporation says the spin-off of Combined Specialty Group, Inc. (CSG) is now expected to be completed after June 30.
Steps necessary to complete the spin-off continue to be taken and the spin-off will be accomplished as soon as practicable. Aon had earlier anticipated the completion of the spin-off during second quarter 2002, subject to market conditions and final regulatory and board approvals.
“Aon is committed to the spin-off of Combined Specialty in order to grow specialty property and casualty insurance premiums,” Patrick Ryan, chairman and CEO, commented. “However, given the expected timing of certain regulatory approvals, the timeframe for the spin-off will extend beyond second quarter 2002.”
The company plans to raise capital in relation to the spin-off primarily to fund specialty property and casualty insurance premium growth.
Separately, Aon is filing a Form 8-K with the Securities and Exchange Commission (SEC) to disclose information relating to a reserve that will be established at CSG and will be addressed in CSG’s amended SEC Form 10 as part of its planned spin-off. The disclosure relates to an expected loss that CSG will incur as a result of an alleged breach of contract by National Program Services, Inc. (NPS), an independent managing general agent, which is no longer in business. Another party has recently sued NPS and related parties alleging fraud by NPS among other things. CSG is in the process of completing its review and analysis of the matter.
In addition, CSG is assisting state authorities and regulatory agencies that are investigating NPS. A reserve amount, which has yet to be determined, will be established for second quarter 2002. The reserve is currently estimated to be approximately $20 million – $30 million pretax based upon information available at this time. 2002 Financial Outlook.
The loss surrounding NPS was not factored into earlier earnings per share guidance. Given the pending spin-off, Aon anticipates that it will provide an outlook on the financial performance for both the “New” Aon (insurance brokerage and consulting operations) and Combined Specialty Group, Inc. (insurance underwriting operations) when second quarter 2002 earnings are reported.
“Most of our major businesses are performing well and client demand for our products and services continues to grow,” Ryan added. “Reinsurance, wholesale and international retail brokerage continue to show good performance and we are taking steps to achieve improved results in U.S. retail brokerage and our managing underwriting group as we announced in our first quarter 2002 earnings report. Our announcement this week on signing a long-term contract with AT&T also underscores our strong capabilities in providing human resource outsourcing services.”