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 said.
In its third-quarter earnings report released late yesterday, Aon said its restructuring plan, announced in the second quarter, would result in an estimated $250 million in pre-tax charges for employee termination and lease consolidation costs, asset impairments, and other costs. 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 who 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 spokesman said the number of cuts required in the U.S. is still being studied. During an investor's conference call, a company executive said many of the lay-offs 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, or 36 cents a share. Revenues rose 2 percent, or $43 million, from $2.35 billion to $2.39 billion.
For the nine months, net income was up 10 percent, or $48 million, going from $465 million, $1.39 a share, to $513 million, or $1.52 a share. Revenues were down less than 1 percent, or $24 million, going from $7.34 billion to $7.31 billion.
During today's 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 reductions in staff, he noted.
He said the underwriting segment was also strong, with 4 percent organic growth.
On the subject of the cost reductions, Mr. Case called the $150 million annual savings a starting figure, and said the company would look to drive efficiency further.
Aon also announced its board of directors has authorized a stock repurchase of up to $1 billion.
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