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Insurance industry

Aon Corp. to Sell Construction Program Group for $85 Million

Strategic Insights

— 1 min read

Aon Corp., a leading insurance broker, has signed a letter of intent to sell its Construction Program Group (CPG) to Old Republic Insurance Co. for $85 million in cash. This sale is part of Aon's strategy to exit the property and casualty underwriting business and focus on its core businesses. The transaction also involves the transfer of approximately $300 million of unearned premium and claim reserves related to business previously written through CPG.

Key Takeaways:

  • Aon Corp. has signed a letter of intent to sell its Construction Program Group (CPG) to Old Republic Insurance Co. for $85 million in cash.
  • The sale is expected to boost Aon's specialty property and casualty reserves by approximately $100 million.
  • The majority of the $100 million increase to reserves is earmarked for losses related to National Program Services Inc., a now-defunct independent managing general agent.
  • Aon has placed the remainder of its specialty property and casualty programs in runoff.
  • The sale of CPG, along with Aon Warranty Group and Virginia Surety, is expected to be completed during the fourth quarter of 2006.
  • The boosting of Aon's specialty property and casualty reserves is expected to be effective in the third quarter of 2006.
  • Aon's president and chief executive officer, Greg Case, stated that the sale continues the company's strategy of exiting the property and casualty underwriting business.

Statistics:

  • Aon Corp. is the second-ranked broker, according to Best's Review's ranking of the top global insurance brokers.
  • The sale of CPG is expected to be completed during the fourth quarter of 2006.
  • The boosting of Aon's specialty property and casualty reserves is expected to be effective in the third quarter of 2006.
  • The majority of the $100 million increase to reserves is earmarked for losses related to National Program Services Inc. ($M70 million).
  • The transfer of approximately $300 million of unearned premium and claim reserves is part of the transaction.

Sources:

  • A. M. Best Company, Inc. - [Original Source]
  • Best's Review - [Original Source]
  • Comtex News Network, Inc. - [Original Source]

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