Chicago – Citing increased competition and falling rates, insurance brokerage Aon Corp., said yesterday that it will cut 2,700 jobs, or approximately 6% of its workforce, as part of a restructuring plan.The broker made the announcement as part of its release of its 3rd quarter financial results.

"Despite soft market conditions, we are making investments that further enable us to best serve our clients, we are managing expenses as we announced a new restructuring program expected to deliver $240 million of annualized savings by 2010, and we repurchased $100 million of stock during the quarter,” said Greg Case, Aon’s president and chief executive officer. “All these actions support our continued commitment to delivering distinctive client value, operational excellence and long-term shareholder value creation."

Aon's biggest competitor, New York-based Marsh & McLennan, also is restructuring and laying off employees, notes the Associated Press.

Aon, cited the need to slash expenses as a contributing factor, and will record related pretax charges of about $360 million for the restructuring.

The job cuts will be mostly in back-office operations, with about 1,100 expected to be "off-shored or outsourced," Aon said in a statement. It will include consolidation of its human resources, finance and information technology divisions.

Aon will also combine European operations on a country-by-country basis, said the Associated Press.

"This restructuring plan has a similar approach to that of our 2005 restructuring plan, which has had very positive results," Case said in a statement. "We are continuing efforts to simplify our complex organization, and eliminate expense that does not contribute directly to our ability to efficiently deliver value-added products and services to our clients."

The restructuring will likely lead to savings between $50 million and $70 million in 2008, $175 million and $200 million in 2009, and $240 million in annualized savings by 2010, the company said.

Aon provides insurance and risk management, consulting, and insurance underwriting worldwide through its subsidiaries and now has about 43,000 employees.

Shares of Aon were unchanged in extended-hours trading after closing up 10 cents at $45.32.

Source: Aon Corp., Associated Press

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access