During a conference call last week, Patrick Ryan, Aons chair and chief executive officer, said Aon reached a point with New York and other states where it felt it was time to create the fund, but that it has not reached any settlements. He added that the company is continuing to cooperate in the investigation.

During questioning, Mr. Ryan said Aon has not engaged in any bid-rigging or solicitation of false quotes. However, he did not say what the firm had done that it would need the settlement for.

He said Aons fund is smaller than the one set up by Marsh because it did not engage in the more egregious violations Marsh was accused of. Aons share of contingent commission was significantly less than Marshs, he added.

For the fourth quarter, Aons net income dropped 12 percent to $189 million, or 56 cents per share. Without the reserve charge, net income would have increased 11 percent. Total revenue in the quarter rose 3 percent to nearly $2.7 billion.

For the year, net income rose 4 percent to $654 million, or $1.95 a share. Revenues were up 5 percent, rising to $10.2 billion.

Mr. Ryan said that Aon is continuing to control expenses through a hiring freeze, through “aggressive pursuit” of new business, and by taking advantage of new technologies.

On the day of its announcement, Aon's stock rose $1.97, just under 9 percent, to close at $24.52. Cliff Gallant, an analyst for Keefe, Bruyette & Woods Inc. in New York, said the stock performance was spurred by a good fourth quarter after a poor third. “It was expected to be a bad quarter and it ended up being better than everyone feared,” he said.

Mr. Gallant does not have a financial relationship with Aon.

He noted that if Aon hadnt taken the $50 million charge, net income per share would have increased by around 15 cents.

But the broker still faces challenges in controlling expenses and the effects of the continued soft market on earnings, he said, noting that Aon has displayed inconsistency in the past, which he suspects will continue. Aon must manage its business and hold onto customers if it is to see continued improvement, he said.

“My concern with brokers generally is that the macro environment is not good because prices are softening. That makes itdifficult for any broker,” he observed. “We are definitely in a period of turmoil for the insurance brokerage business and I think the two major brokers, Marsh and Aon, are susceptible to losing shares as some of their bigger clients begin to diversify a bit in terms of which brokers they use.”

He said his firm surveyed risk managers, who indicate they now feel it is their fiduciary duty to spread out accounts among brokers instead of keeping them with one.

Flag: Were Clean

Willis CEO: No Fund Needed

A day after Aon's announcement that it would establish a $50 million settlement fund, the CEO of Willis Group Holdings told analysts his company has not been tarred by the fee scandal surrounding other brokers and will not reserve funds to settle illegal conduct charges.

“We have not put up a reserve,” said Joe Plumeri, chair and chief executive of the London-headquartered insurance brokerage firm. “We found no reason to put up a reserve. We haven't had discussions with the attorney general that would suggest that we should put up a reserve.”

He did note, however, that there was the possibility someone within the organization may have acted improperly, outside of the knowledge of Willis, but insisted that there was no institutional misconduct.

Willis net income rose more than 3 percent in 2004 to $427 million, or $2.54 a share, while revenues jumped roughly 10 percent to $2.3 billion.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, February 11, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.