Aon Corp, one of the world's largest insurance brokers, said Monday it has agreed to sell two units for about 2.75 billion U.S. dollars and will use the proceeds to buy back shares.
The insurance brokerage headquartered in downtown Chicagois is selling two insurance units for 2.75 billion dollars in separate cash deals to focus on more profitable lines of business in the face of falling insurance rates and will ramp up its share buyback program, the company said in the sale announcement Monday.
The announcement comes seven weeks after Aon kicked off its second restructuring in less than three years by cutting 2,700 jobs, or 6 percent of its work force, as part of a plan expected to save it 240 million dollars a year by 2010. Its largest competitor, Marsh & McLennan, also is restructuring and laying off employees.
The company said it sold its Combined Insurance Co unit to ACE Ltd for 2.4 billion dollars in cash and sold its Sterling Life Insurance unit to Munich Re for 352 million dollars.
Aon is planning to use the 2.6 billion dollars in proceeds from the deals to increase its stock buyback plan. Proceeds from the sales will increase Aon's share buyback power to 2.78 billion dollars, the company said.
Chief Executive Greg Case said the divestitures are part of its strategy to exit the lower- margin and more capital-intensive insurance underwriting business. The moves shift emphasis to its other two businesses: brokerage services and consulting.
ACE's deal to buy Combined Insurance, which provides individual accident coverage and supplemental health insurance to more than 4 million policyholders, is expected to be completed by the second quarter of 2008, ACE said.
Evan Greenberg, chairman and chief executive of Glenview-based Ace Ltd., called the acquisition force of nearly 7,000 agents and an opportunity for considerable growth. This could be a win for both Aon and ACE, he said.
Source: Xinhua
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