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AON Corporation (AOC)
Aon pays $190 million to settle insurance probe.
Aon Corp., the world's No. 2 insurance brokerage, has agreed to pay $190 million and adopt reforms to end a bid-rigging investigation by three states. The insurance broker agreed to pay $190 million to settle charges that it accepted hundreds of millions of dollars in exchange for steering clients toward favored insurers.
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Along the lines of the settlement announced Friday, Chicago-based Aon will provide the money over a three-year period for restitution to policyholders. The pact ends probes by the states of New York, Illinois and Connecticut. The agreement to settle civil charges with the attorneys general of Illinois, New York and Connecticut comes after Aon's larger rival Marsh & McLennan Cos.' agreement in January to pay $850 million for rigging bids and fixing prices in the insurance market.
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Aon's Chairman and Chief Executive Officer Patrick Ryan apologized for his company's accepting various commissions and entering other arrangements that created conflicts of interest. New York Attorney General Eliot Spitzer's Oct. 14 lawsuit against Marsh set off a string of investigations by state and federal regulators into the business practices of insurers and the brokers who act as middlemen between insurance companies and corporate clients seeking coverage. Aon's agreement calls for the company to set up a fund for customers, including Illinois clients and policyholders, who paid the largest kickbacks, or contingent commissions
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Aon will pay $76 million into the fund on or before Sept. 1, 2005, another $76 million on or before Sept. 1, 2006, and $38 million more on or before Sept. 1, 2007. Illinois will also file a civil lawsuit against Aon, charging it with violations of the Illinois Consumer Fraud and Deceptive Business Practices Act and the state's insurance code. Aon shares rose 3.43 percent to $25.00 after the settlement was announced in trading on the New York Stock Exchange. Aon's fourth-quarter profits declined by 12 percent to $189 million, largely because of its decision to end contingency commissions. The company said it collected $15 million in contingent commissions in the quarter, down from $52 million in the same period of 2003.Aon shares rose 77 cents, or 3 percent, to $24.94 in morning trading Friday on the New York Stock Exchange. The stock has been trading at a 52-week range between $18.15 to $29.44
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Profile |
Aon Corporation is a holding company whose operating subsidiaries carry on business in three distinct segments: insurance brokerage and other services; consulting; and insurance underwriting. The Insurance Brokerage and Other Services segment consists of its retail and reinsurance brokerage operations. The Consulting segment provides consulting services including employee benefits, human resources, and change management. Its Insurance Underwriting segment sells life and accident and health insurance, extended warranty, specialty and other insurance products.
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