Aon To Eliminate 1,400 Jobs
As Part Of Restructuring Plan
Aon plans to eliminate 1,400 positions by 2007–750 of which will be in the United Kingdom–as part of its three-year restructuring plan, the Chicago-based insurance broker announced.
Aon, in its third-quarter earnings report, said its plan would result in an estimated $250 million in pre-tax charges for employee termination and lease consolidation costs, asset impairments, and other expenses. Annualized savings are targeted to be $150 million by 2008. Restructuring expenses amounted to $35 million in the third quarter of this year.
Greg Case, Aon’s president and chief operating officer, announced the company would begin its restructuring efforts back in August, but did not say how many positions would be affected at that time. He did say that the restructuring was necessary–especially in the U.K.–to drive down costs.
In 2000, Aon eliminated 3,000 jobs out of a workforce of 50,000 employees to make it more efficient.
A company representative said the number of cuts required in the United States is still being studied. During an investor’s conference call, an Aon executive said many of the layoffs would come in the fourth quarter.
For the third quarter, Aon reported net income was flat compared to the same period last year at $122 million (36 cents a share). Revenues rose 2 percent, or $43 million, to $2.39 billion. For the first nine months, net income was up 10 percent, or $48 million, going from $465 million ($1.39 a share) to $513 million ($1.52 a share). Revenues were down less than 1 percent, to $7.31 billion.
During the conference call, Mr. Case said U.S. brokerage showed growth, but international and reinsurance brokerage were off in part because of the effects of the soft market. Consulting was below expectations because of actions taken by clients, including consolidations and staff reductions, he noted.
He said the underwriting segment was also strong, with 4 percent organic growth.
On cost reductions, Mr. Case called the $150 million annual savings a starting figure and said the company would look to drive efficiencies further.
Aon also announced its board of directors has authorized a stock repurchase of up to $1 billion.
Aon expects the downsizing to result in annualized savings of $150 million by 2008