Aon Sells Combined Insurance Co. to ACE Limited and Sterling Life Insurance to Munich Re Group

ACE Limited to Acquire Combined Insurance Co. for $2.4 billion and Munich Re Group to Purchase Sterling Life Insurance for $352 million

  • Strategic divestiture of Insurance Underwriting business further aligns core assets
  • Company expects to receive after-tax cash proceeds and dividends of approximately $2.6 billion
  • Company increases authorized share repurchase program by $2.6 billion

CHICAGO, IL – December 17, 2007 – Aon Corporation (NYSE: AOC) today announced that it has signed separate definitive agreements to sell its Combined Insurance Company of America (CICA) and Sterling Life Insurance Company (Sterling). The Sterling transaction is expected to be completed by the end of the first quarter 2008 and CICA is expected to be completed by the end of the second quarter 2008.

Aon also announced that it will devote the proceeds of these transactions to an increase in its previously authorized share repurchase program. The program will increase by $2.6 billion, bringing the total amount currently available for repurchase to approximately $2.78 billion.

“Through these divestitures, we have further simplified our global organization and successfully executed our strategy to exit the lower margin and more capital intensive insurance underwriting business,” said Greg Case, president and chief executive officer, Aon Corporation. “Our core assets will now be more strategically aligned as we expand our capabilities to better serve our risk brokerage and consulting clients. At the same time, the increased share repurchase program reflects our ongoing belief in the underlying positive momentum of the business and is an effective use of capital to maximize long-term shareholder value.”

Aon signed separate definitive agreements to sell its CICA business to ACE Limited for cash consideration of $2.4 billion and its Sterling business to Munich Re Group for cash consideration of $352 million, in each case subject to closing adjustments. Additionally, the Company expects to extract a one-time cash dividend of $325 million from CICA prior to the close of the transaction. Total after-tax cash proceeds and dividends are expected to be approximately $2.6 billion and are subject to final transaction costs.

Results of both CICA and Sterling will be placed into discontinued operations in the fourth quarter of 2007.

The purchase of shares will be dependent on prevailing market conditions, alternative uses of capital and other factors. Through the close of trading on December 17, 2007, the Company had repurchased 48.1 million shares for $1.82 billion under the previously existing $2.0 billion share repurchase program authorized in November 2005 and increased in November 2006.

Aon Capital Markets, Credit Suisse Securities (USA) LLC and Merrill Lynch & Co. acted as advisors on the separate transactions.

About Aon

Aon Corporation (NYSE:AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. Through its 43,000 professionals worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was ranked by A.M. Best as the number one global insurance brokerage in 2007 based on brokerage revenues, and voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 by the readers of Business Insurance. For more information on Aon, log onto www.aon.com.

Tags: , ,