Aon Net Soars Despite 9/11 Dispute
NU Online News Service, April 29, 11:02 a.m. EST?Aon Corp. reported today that net income for the first quarter had soared despite a $56 million reserve charge for a dispute with reinsurers over Sept. 11 claims.
Chicago-based Aon reported first-quarter 2002 net income of $104 million, compared with $19 million in the same period a year ago--coming out to 37 cents per share, compared with 7 cents last year.
"Our brokerage segment posted significantly improved organic revenue growth of 13 percent for the quarter due in part to better performance in U.S. retail new business production, and continued strong performance in international, reinsurance and wholesale brokerage," Aon's chairman and chief executive officer, Patrick G. Ryan, said in a statement.
Aon said consolidated revenue of $2 billion in the first quarter increased 15 percent from $1.8 billion in the prior year.
The reserving step for the reinsurance claims, Aon said, is being taken because a recent court ruling, in an unrelated case, might impact Aon's choice of Manhattan Federal Court as a venue for the case.
Aon said it continues to believe that its insurance underwriting subsidiary, Combined Insurance Company of America, which underwrote accident insurance for the benefit of Aon's employees, has valid reinsurance.
One hundred and seventy-six AON employees were killed in the terrorist attack on the World Trade Center. Mr. Ryan said the dispute with the Lloyds' syndicates, which provide CICA's reinsurance, "will in no way impact the payment of benefits made to our employees' families and beneficiaries."
"Accounting rules," he said, "require that we be able to reasonably estimate the probable recovery under our claim to maintain a receivable, which we are precluded from doing at this time given the recent ruling. Therefore, we believe it is appropriate to establish an allowance at this time," he added.
Mr. Ryan said that the accounting decision would "in no way affect our vigorous pursuit of our claim under our reinsurance contract."
Aon said it believes that it can bring the case in New York based upon the provisions of the Airline Stabilization Act, and that Manhattan, the Southern District of New York, is the only proper jurisdiction for Aon's reinsurance claim.
Aon said the law creates a federal cause of action for damages and provides that the Southern District of New York "shall have original and exclusive jurisdiction over all actions for any claim?resulting from or relating to the terrorist-related aircraft crashes of Sept. 11, 2001."
Aon's reinsurers at Lloyds' have commenced an action in a U.K. High Court, and have sought dismissal of Aon's New York case in favor of the U.K. action.
Aon said the decision by another judge in Manhattan Federal Court, which addressed exclusive jurisdiction for suits brought in relation to the World Trade Center terrorist attack, "has raised the possibility that Aon's suit may not be heard in that district court." The district court judge assigned to Aon's case in New York has not yet ruled on the issue of jurisdiction.
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