CHICAGO, March 4-- Aon Corporation has reached a comprehensive agreement with five agencies in three states to settle investigations relating to contingent commissions and other business practices that may have created actual or potential conflicts of interest. Parties involved in the settlement, in which Aon admits no wrongdoing or liability, include the attorneys general of New York, Illinois and Connecticut as well as the insurance departments of New York and Illinois. The settlement involves no fines or penalties.
Elements of the comprehensive agreement include:
-- Creation of a $190 million fund to provide compensation to eligible U.S. clients with policies incepted or renewed between January 1, 2001, and December 31, 2004.
-- Commitment to new business practices that include heightened disclosure of remuneration and the elimination of practices that may have posed conflicts of interest.
-- Establishment of a Compliance Committee of the Aon Board of Directors. Under the terms of the settlement, Aon will be contacting U.S. policyholders who may be eligible for payments from the fund. The size of the payments will be calculated with a formula approved by other parties to the settlement. Additional information about the fund will be available on Aon's web site ( http://www.aon.com ).
Patrick G. Ryan, Aon chairman and chief executive officer, said, "Aon now has these investigations behind us and can move forward with renewed focus on our clients. We are enhancing policies, practices and controls; setting new, higher standards for service excellence; and re-energizing our commitment to safeguarding the trust that clients put in our 48,000 people every day."
Mr. Ryan added, "While we do not agree with a number of allegations in the complaints, the settlement permits us to look to the future. I believe that the business reforms emerging from these investigations establish a model that can be - and should be - embraced by the whole industry. Clients have every right to expect transactions that are transparent and free of even any appearance of conflicts of interests."
Aon has previously announced that it would eliminate contingent commissions effective after October 1, 2004. The elimination of contingent commissions was also an element of the settlement agreement.
Aon has established a reserve of $180 million, representing the present value of the $190 million settlement amount. The settlement will be funded in three installments. Separately, Aon has established a $40 million reserve in connection with related litigation matters.
The financial impact of these actions is approximately $0.32 cents per diluted share, net of the previously booked reserves of $50 million, and will be recorded in the fourth quarter of 2004.
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