CHICAGO - (Business Wire) Fitch Ratings has affirmed Aon Corporation's (Aon) Issuer Default Rating (IDR) and related senior debt ratings at 'BBB+', as well as the commercial paper rating at 'F2'. The Rating Outlook is Stable. A complete list of ratings is at the end of this release.
Fitch's rating action follows Aon's announcement on Nov. 28, 2008 that it has completed its acquisition of Benfield Group Limited for a purchase price of roughly $1.43 billion. The price represents a $320 million reduction from the $1.75 billion estimated in August, due to Aon's foreign currency hedging and the strengthened U.S. dollar.
Fitch's affirmation reflects Aon's strong balance sheet and Fitch's belief that Aon's financial leverage, as measured by debt-to-EBITDA and debt-to-total capital ratios, will remain within a reasonable range for the rating category in the near term.
Additionally, Fitch believes that in the long-term, Aon's acquisition of Benfield will result in positive business and operational synergies, with reasonable integration risk. With the close of its acquisition, Aon announced its related restructuring plan and expects run-rate expense savings of approximately $122 million, to be fully realized by the end of 2011. Benfield is currently the world's third largest reinsurance broker, following Aon and Guy Carpenter, and as such, this transaction will significantly increase Aon's market share in this area. Fitch also believes that Aon's current management team has a very good track record related to the execution of strategic plans and expense cutting, and therefore Fitch expects integration risk will be manageable.
Aon's ratings reflect the company's favorable competitive position amongst the top three global brokers, with major operations in insurance brokerage, reinsurance brokerage and human capital consulting. Aon continues to demonstrate its ability to retain clients and grow new business while improving profitability. Cash flow remains strong with earnings-based interest coverage of roughly 10 times (x) as of Sept. 30, 2008.
Fitch has affirmed the following ratings with a Stable Outlook:
Aon Corporation
--IDR at 'BBB+';
--$225 million 7.375% senior debt due Dec. 14, 2012 at 'BBB+';
--Short-term IDR at 'F2';
--Commercial paper at 'F2'.
Aon Capital A
--$726 million 8.205% trust preferred capital securities due Jan. 1, 2027 at 'BBB'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Gretchen K. Roetzer, +1-312-606-2327 (Chicago)
Gregory W. Dickerson, +1-212-908-0220 (New York)
Tyrene Frederick-Mack, +1-212-908-0540
(Media Relations, New York)
tyrene.frederick-mack@fitchratings.com
