Former McKinsey consultant welcomed as agent of change, freshoutsider

By michael ha

Aon Corp.'s recently appointed chief executive officer, GregoryCase, is envisioning his new firm in the image of his formeremployer–management consulting giant McKinsey & Company–vowingto help the troubled brokerage embrace a more advice-based approachin its client relationships and put less emphasis on just productsales.

In an interview with National Underwriter soon after taking overthe top job from Patrick Ryan, Mr. Case expressed his plans tobring what he learned at McKinsey to Aon, turning Aon into a firmthat clients would turn to not just for buying insurance but for“indispensable advice and consulting on the insuranceindustry.”

He said he sees an opportunity at Aon “to build advice moresystematically into how we deal with clients…to build clientrelationships into more of an advice-based approach, to think morecompletely about their risk needs.”

“Both McKinsey and Aon are advice-based businesses. Both requirea client-leadership focus in which value gets added at the clientlevel. We shouldn't just focus on product sale,” he added.

Mr. Case billed himself as a “client-service driven” executiveand emphasized that is how he will approach his new job leading theworld's second-largest broker.

“Client-service has been ingrained in my history back fromMcKinsey and before. Our game plans and actions moving forward willbe judged in many respects by how well we serve our clients,” hesaid. His approach will likely prove to be useful in light ofrecent probes and Aon's settlement with regulators in Marchconcerning allegations of steering business to insurers that paidthe most contingent commissions.

“I am eagerly looking forward to a chance to help write the nextchapter in this institution, in an industry that is going through alot of turmoil,” Mr. Case told NU.

At the same time, Mr. Case will also maintain some managementcontinuity at Aon, with the broker's longtime boss Mr. Ryancontinuing to serve as executive chairman of Aon's board ofdirectors. Indeed, Mr. Case said one of his demands when he wasoffered the CEO post was to keep Mr. Ryan as the firm's chairman.He said he feels “very fortunate to be following in the footstepsof Pat Ryan.”

Mr. Ryan–the 67-year-old industry icon who led Aon and itspredecessor, Ryan Insurance, for the past 40 years–has saidpublicly he is excited to focus solely on client relationships anddeveloping new opportunities as he continues to serve as executivechairman. The change came six months after Chicago-based Aon firstannounced that it had begun a search process for a CEO on Sept. 30,2004.

“I have a lot of respect and admiration for Aon, its leadership,its people, its clients,” said Mr. Case. “I am very excited to befully dedicated and devoted to this organization.”

The appointment of Mr. Case, 42, also represents youth takingthe lead at Aon, which has been under Mr. Ryan's guidance for thelast four decades. However, he also brings a wealth of experienceto his new job.

Mr. Case, who spent 17 years at McKinsey–a management consultingfirm with 11,500 employees–most recently led the firm's financialservices practice. He also served as head of McKinsey's globalinsurance practice and was the youngest member of the firm's25-person shareholders operating committee, where he focused onclient relationships.

Regarding his credentials, Mr. Case told NU he “built and ledtwo major practices at McKinsey–in the global insurance businessand North American financial services business. What I bring to thetable is a proven record of building businesses inside aprofessional-services firm.”

While Mr. Case has just joined Aon, he already has somefamiliarity with the broker, because McKinsey has been advising Aonin a consulting arrangement for the past several months. At thesame time, coming onboard as an outsider has certain benefits, Mr.Case added. “What I bring to complement Aon's existing managementteam is a new point of view. I am an outsider who is excited aboutthe franchise and excited to start working with the Aon team,” hesaid.

Indeed, analysts told NU that Mr. Case appears to be a solidchoice for Aon. Observers added he is also a timely pick–arelatively low-profile executive with a fresh perspective who caneffectively oversee changes in a competitive environment andimplement reforms as mandated by Aon's recent regulatorysettlement.

If there is one concern, however, it is that Mr. Case lacksoperational management experience on the scale of Aon, which hassome 48,000 employees around the world. (This concern brieflysurfaced during Mr. Case's first analyst conference call lastmonth, when the only question asked, by Credit Suisse First Bostonanalyst Charles Gates, was about Mr. Case's background and how manyemployees he had managed during his tenure at McKinsey.)

“Mr. Case is very young and relatively inexperienced when itcomes to corporate management,” noted Fitch Ratings insuranceanalyst Gretchen Roetzer. However, she added, “Aon was looking fora fresh view–a fresh start with no conflicts from the new CEO–andMr. Case brings that. I was also expecting someone from outside.Aon very clearly wanted someone fresh in the current [New YorkAttorney General] Spitzer environment.”

An A.M. Best Company senior analyst, Joseph Zazzera, added that“at this point, we are going to have to wait and see how Mr. Casedoes in his position, but given his consulting experience in globalinsurance practice and financial service practices, he brings a lotto the table for Aon.”

Analysts noted that Mr. Case's entry into Aon follows aturbulent period at the firm and the industry at large. In March,Aon agreed to pay $190 million in restitution to policyholders overa three-year period and adopt a number of operational reforms tosettle probes by three states–New York, Connecticut andIllinois–regarding allegations of fraud and anti-competitivepractices, especially involving controversial contingent commissionarrangements.

The settlement also prompted Mr. Ryan to issue a formal apology,which noted that the contingent commission arrangements–nowabandoned at Aon–created “conflicts of interest,” and that Aon“took advantage of those conflicts.” (See NU, March 14.)

Mark Patterson, an analyst at NWQ Investment Management in LosAngeles–Aon's second-largest stakeholder, with more than 29.2million Aon shares–noted in expressing his approval of the new CEOthat Mr. Case is a “good fit” for Aon as the brokerage embarks onstrategic changes in the aftermath of regulatory probes.

“I think that given what's going on in the industry and recentchanges that were brought on by regulatory investigations into thebroker group, it's a very good time to have a change–to have a newleader from outside,” Mr. Patterson told NU.

“He's relatively unknown in the sense that he is new to actuallyrunning an insurance business, but I believe Mr. Case is quite anappropriate choice considering where Aon is at and its change ofthe business model–a new environment absent contingentcommissions,” Mr. Patterson added. “Mr. Case appears to have aclient-focused, strategic approach that is quite applicable at thistime. I believe he's up to the challenge.”

Flag: Face Value

Gregory Case At A Glance

o Age: 42

o Became Aon's new president and CEO on April 4, 2005.

o Succeeded: Patrick Ryan, 67, who remains as Aon's executivechairman

o Previous experience: Spent 17 years at management consultinggiant McKinsey & Co., most recently leading itsfinancial-services practice. Also led the firm's global insurancepractice and was the youngest member of McKinsey's 25-personshareholders operating committee, where he focused on clientrelationships.

“I see an opportunity at Aon to build advice more systematicallyinto how we deal with clients…to build client relationships intomore of an advice-based approach, to think more completely abouttheir risk needs.”

Gregory Case, Aon CEO

Flag: On The Money

Pay $cale For Aon's New CEO

In one aspect, Aon's new CEO, Gregory Case, is alreadyoutperforming the firm's longtime boss, Patrick Ryan. Here is theskinny on how Mr. Case comes out on top when it comes tosalaries:

o Salary: According to a Securities andExchange Commission filing, Mr. Case's salary is $1.5 million peryear in a five-year contract–higher than what was offered to Mr.Ryan, who received a $1.1 million salary in 2003, the year with themost recent public information.

o Bonus: Mr. Case will get an annual bonus inthe range of $1.875 million to $3.75 million, and he received stockoptions on one million Aon shares and a one-time restricted-stockgrant of 125,000 shares.

o Net Worth: Mr. Case still has a ways to gobefore catching up with Mr. Ryan on a net-worth basis. Mr. Ryan–whofounded Aon's predecessor, Ryan Insurance, 40 years ago–owns closeto 23 million Aon shares, currently worth more than $510million.