Analyst Welcomes Aon Chief's Plan To Resign

NU Online News Service, Oct. 4, 2:07 p.m. EDT

"We view this announcement as an incremental positive for [Aon's] stock," said Jay Gelb, insurance analyst at the New York-based Prudential Equity Group LLC. Mr. Gelb said he would welcome the upcoming management change because while the Chicago-based insurance broker has a good global franchise, its potential has been "untapped due largely to senior management's missteps."

Last Thursday, Aon Corporation announced that its board is initiating a CEO succession process. Mr. Ryan plans to retire from the chief executive position once a successor is named, but will thereafter continue to serve as chairman.

Mr. Gelb from Prudential Equity observed that Michael O'Halleran, 54, president and chief operating officer at Aon, has removed himself from consideration for the CEO spot, which means the board will likely look outside the firm for a replacement, "which we believe is the best path."

"Our view is that there are plenty of problems to be fixed at Aon," Mr. Gelb said. "Our earnings estimates present downside risk as management works its way through this transition." He added, however, "The potential benefits of new leadership could result in multiple expansion."

For the 2004 first half, Aon's net income rose 15 percent to $343 million while revenues climbed 7 percent to $5.11 billion. But Mr. Ryan during his August conference call acknowledged "some disappointments" in the results.

Organic revenue growth was a major disappointment for the firm, he had noted. Organic growth in risk and brokerage services during the second quarter had showed a negative one percent, with reinsurance brokerage showing a negative eight percent organic growth.

Aon offers risk-management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. It employs some 52,000 professionals in its 600 offices in more than 120 countries.

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