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It's at least the second reinsurance deal that Aon has done this year. In February, it announced plans to pay more than $30 million for a reinsurance brokerage unit of Arthur J. Gallagher & Co. of Itasca.
Insurance brokers serve as middlemen, using their industry expertise to help corporations and other clients find optimal insurance coverage.
Reinsurance is a kind of insurance taken on by insurers, to spread the risk of large-scale financial obligations they might face in the event of catastrophic claims, such as those caused by a hurricane or other natural disaster.
Aon, which has spent $3.7 billion buying back its shares under an existing share-repurchase program, also said a previously announced share-buyback program remains on track. It expects to exercise the $900 million in buybacks remaining under its authorization by the end of 2009.
Wall Street liked the deal. On a day when the Dow Jones industrial average gained 1.7 percent, Aon stock rose 2.6 percent, to close at $47.92 a share.
The proposed 350-pence-a-share accord between Aon and Benfield represents a 29 percent premium to the 271 pence at which Benfield shares closed Thursday on the London Stock Exchange.
But Alan Devlin, an analyst for Atlantic Equities, said in a report that he thought Aon struck the deal for "a very attractive price."
And news of the deal prompted Keefe Bruyette & Woods analyst Cliff Gallant to raise his 2009 earnings per-share estimate on Aon to $3.45 a share from $3.30 a share.
Gallant maintains a price target of $48 on the company and a "market perform" rating, meaning he expects Aon to achieve a total rate of return in a range between negative 5 percent and positive 15 percent.
Over the past several years, Aon Chief Executive Greg Case said, the company has "made significant progress in strengthening Aon's operational platform and global network." Aon, he said, intends to "build on this progress" by acquiring Benfield and folding the British company into its existing Aon Re Global segment.
Benfield has particular strength in the Florida and Southeastern U.S. catastrophe markets, Aon said.
Once the $6.55-a-share, all-cash buyout is completed, Aon will rename its reinsurance business Aon Benfield Re.
Once the combination is fully integrated in 2011, the two companies said, Aon Benfield is expected to yield annual cost savings of $122 million, primarily from combining administrative and back-office functions.
Aon expects "strong cash flows" to continue following the purchase.
As part of the purchase, Aon also will assume about $170 million of existing Benfield debt.
In October 2006, the British financial press reported that Benfield was furious because Aon's reinsurance group had hired away some top staffers in one of the British firm's units.
byerak@tribune.com
jpmiller@tribune.com
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