Fitch Downgrades Aon

By Mark E. Ruquet

NU Online News Service, May 7, 12:23 p.m.EST?Fitch Ratings downgraded the senior debt rating ofinsurance broker Aon, but said the fundamental core operations lookstrong.

The New York City?based rating agency said it downgraded thesenior debt rating from "A-plus" to "A" and removed it from RatingWatch Negative yesterday. Fitch affirmed the Chicago?based broker'scommercial paper rating at "F1," adding that the rating outlook isnegative.

No ratings actions were taken on the firm's insurance company,Combined Insurance Company of America. The Insurer FinancialStrength (IFS) has a "AA" rating or "F1-plus" for short-termfinancial strength rating. The IFS remains on Rating WatchNegative, the rating agency said.

Fitch said it made the rating change to reflect the firm's "highfinancial leverage position relative to expectations," and the costof its business transformation plan, which includes the spin-off ofCombined into a separate company.

In order to make up for the loss in revenue from the divestitureof Combined, the brokers insurance services and consulting businesswill be required to "perform at high levels to maintain expectedcash flow coverage ratios."

However, Fitch said Aon's fundamental core business remainsstrong and "merits strong ratings for both its senior debt and itscommercial paper."

A spokesman for Aon would not comment on the report.

As of 11:30 a.m., Aon's stock was down 28 cents to $34.98 ashare.

Completion of the spin-off of Combined is expected during thesecond quarter of this year.