Chicago - Aon Corp. has signed separate definitive agreements to sell its Combined Insurance Company of America (CICA) and Sterling Life Insurance Co. (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 signed separate definitive agreements to sell its CICA business to Bermuda-based ACE Ltd. for cash consideration of $2.4 billion, and its Sterling business to Munich Re Group, Germany, 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.
Aon 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," says Greg Case, president and CEO of Aon. "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."
Source: Aon Corp.
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