Aon Moves On Exit Plan, Announces Sale of Construction Program

October 25, 2006

Chicago-based Aon Corp. today announced that it has taken further steps to exit its property & casualty underwriting business by signing a letter of intent for the sale of its Construction Program Group (CPG). Aon also announced that it will strengthen Specialty Property & Casualty reserves by approximately $100 million, the company release said.

Aon has signed a letter of intent to sell its Construction Program Group (CPG), a managing general underwriter, to Old Republic Insurance Company for cash consideration of $85 million. The transaction also includes the transfer of approximately $300 million of unearned premium and claim reserves currently on the books of Virginia Surety Company, Inc., which relate to business previously written through CPG.

The sale of CPG and previously announced pending sale of Aon Warranty Group and Virginia Surety are anticipated to be completed in the fourth quarter of 2006.

Related to the sale of Aon Warranty Group, Virginia Surety and CPG, and the balance of Specialty Property & Casualty business being placed in run-off, Aon expects to strengthen Specialty Property & Casualty reserves by approximately $100 million effective in the third quarter of 2006. The majority of the increase relates to National Program Services (NPS), an independent managing general underwriter which wrote habitational risk on behalf of Virginia Surety. The principal of NPS was convicted of criminal theft in 2004 in connection with NPS’s actions with respect to Virginia Surety and other insurers.

“The steps we are announcing today continue implementation of our decision to exit the Specialty Property and Casualty underwriting businesses,” said Greg Case, Aon president and chief executive officer. “We have placed the remainder of the Specialty Property and Casualty programs in run-off, and will continue to explore disposition alternatives for other portions of the book.”

Case said the move enables Aon to focus on its core businesses including brokerage.

Aon Corp. identifies itself as a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 46,000 employees working in Aon’s 500 offices in more than 120 countries.

Source: Aon Corp.

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