Fitch upgrades Aon’s rating outlook

Fitch Ratings has revised Aon Corporation’s rating outlook to stable from negative, based largely on the company’s new business model, the ratings agency has announced.
“The revised stable outlook reflects Aon’s progress in developing a new business model that is less reliant on contingent commission income, the company’s improved financial flexibility and positive financial trends, and a lack of any additional broker market turmoil,” Fitch said in a release.
“Over the past year, Aon has proven its ability to retain clients and grow new business while improving profitability. Cash flow remains strong with earnings-based interest coverage of over 11 times.”
Also, Aon has reduced its financial leverage by repaying debt and has no debt maturing until 2007, Fitch noted. Aon recently refinanced its bank credit facilities and removed guarantees and strict covenants and extended the maturity date for five years. Fitch says it views these changes as positive steps towards ensuring Aon’s future profitability.
“Fitch believes that since Aon’s settlement with the New York attorney general in March 2005, the company has executed its stated strategic plans as projected,” the ratings agency reported. “Aon hired a new CEO, announced a three-year restructuring plan projected to bring $150 million in annualized cost savings, sold its claims and wholesale brokerage businesses, divested its stake in Endurance Specialty Holdings, Ltd. and is now exploring strategic alternatives for its property and casualty, warranty businesses.”
In mid-November 2005, Aon announced it is seeking a new owner for its warranty, credit insurance and property and casualty underwriting businesses. Around the same time, the company announced it had sold its U.S.-based wholesale broking operation, Swett & Crawford, to an investor group including Hicks, Muse, Tate & Furst Inc. and Banc of America Capital Investors.