What's Behind Aon Corporation's Sell-Off, Buy-Back Strategy?

In a new strategic plan that seems tailored for reassuring investors on Wall Street, Aon Corporation (NYSE: AOC) announced late Friday that it intends to sell off two of its business units for $2.75 billion so that the company can use the proceeds for a stock buy-back program.

Specifically, the company has reached agreements to sell its properties the Combined Insurance Company of America (CICA) to ACE Limited for cash consideration of $2.4 billion and the Sterling Life Insurance Company (Sterling) to Munich Re Group for cash consideration of $352 million. The agreements are expected to be completed by the end of the first quarter and the end of the second quarter 2008, respectively.

“Through these divestitures, we have further simplified our global organization and successfully executed our strategy to exit the lower margin and more capital intensive insurance underwriting business,” said Aon President/CEO Greg Case in a press release.

“Our core assets will now be more strategically aligned as we expand our capabilities to better serve our risk brokerage and consulting clients. At the same time, the increased share repurchase program reflects our ongoing belief in the underlying positive momentum of the business and is an effective use of capital to maximize long-term shareholder value,” he added.

NewsVisual created an IntellectSpace Knowledge Map that illustrates that several Aon Directors have strong business connections and leadership experience.

The most notable among them, however, is Director (Retired) General Richard B. Myers, the former Chairman of the Joint Chiefs of Staff from 2001 through 2005, who currently also serves on the boards of John Deere & Co and Northrop Grumman Corp.

The Knowledge Map also shows that the following Aon Directors serve as members of the Board of Directors with more than one other company:

Director Robert S. Morrison also serves on the boards of 3M, Illinois Tool Works, Inc and the Tribune Co; Director Carolyn Y. Woo, the Dean of the Mendoza College of Business at the University of Notre Dame, also serves on the boards of NiSource Industries, Inc and Circuit City Stores, Inc; and Director Andrew J. McKenna is also the Chairman of Schwarz Co, as well as a member of the boards of McDonald’s Corp and Click Commerce, Inc.

Given the collective business knowledge of these members of Aon’s Board of Directors, it seems likely that the company’s Management Team received the benefit of their advice, and the sell-off and share repurchase plan is therefore a good business strategy for the company to pursue.

(Note: the information contained and presented in Knowledge Maps is public information from the Securities and Exchange Commission of the United States of America).