Aon may cut 700 jobs after buying Benfield
Aon Corp. the world’s largest insurance broker, will cut as many as 700 jobs in connection with its acquisition of London-based competitor Benfield Group Ltd.
The purchase, completed today, was for $1.43 billion, about $320 million lower than the price announced in August because of a stronger U.S. dollar, Chicago-based Aon said today in a statement. The company will book about $185 million in costs over three years tied to job cuts and lease consolidations, Aon said.
Chief Executive Officer Greg Case, hired in 2005, has cut at least 3,200 jobs and sold Aon’s underwriting units to focus on matching buyers and sellers of commercial coverage. Aon said it expects to save as much as $41 million next year, up to $94 million in 2010 and about $122 million in 2011 after combining its reinsurance operations with Benfield.
The benefits of the acquisition will be “incredibly attractive” because of the cost savings, Chief Financial Officer Christa Davies said in an Aug. 22 conference call.
Most of the 500 to 700 positions to be eliminated don’t deal directly with customers, said Aon, which had about 42,500 employees at the end of 2007 compared with about 2,000 at Benfield, according to Bloomberg data.
The company’s combined reinsurance broker will be called Aon Benfield and will launch on Dec. 1, Aon said. Reinsurers sell coverage to primary insurers.
Former Rivals
Case expanded Aon’s London-based reinsurance business in 2006 when he hired about 20 Benfield employees, triggering a lawsuit that was later settled.
Aon slipped 14 cents to $45.30 at 1:15 p.m. in New York Stock Exchange composite trading. The broker has declined 5 percent this year, compared with the 53 percent decline of the 24-company KBW Insurance Index.
Aon expects to book $44 million in fourth-quarter costs tied to a currency hedging program, the company said, after reporting $6 million of the expenses in the third quarter.
Aon sold Combined Insurance Company of America to Ace Ltd. in April for $2.56 billion.