Best’s News & Research Service - December 17, 2007 10:20 AM (EST)
A.M. Best Revises Implications to Positive for Aon Corporation’s Subsidiaries
OLDWICK, N.J. //BestWire// - A.M. Best Co. has revised the under review status to positive implications from negative implications for the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of Aon Corporation’s (Aon) (Chicago, IL) [NYSE: AOC] life/health subsidiaries, Combined Insurance Company of America (CICA) (Glenview, IL) and Combined Life Insurance Company of New York (CLICNY) (New York, NY). A.M. Best also has revised the under review status to positive implications from negative implications for the FSR of A-(Excellent) and the ICR of “a-” of Sterling Life Insurance Company (Sterling) (domiciled in Glenview, IL, but located in Bellingham, WA), a separately rated life/health subsidiary of Aon.
These rating actions follow the announcement by Aon that it has signed separate definitive agreements to sell its remaining life/health subsidiaries through two separate transactions. The ratings were placed under review with negative implications in August of 2007 after Aon management made public that it was considering either a spin off or a sale of its life/health subsidiaries.
Aon announced that both CICA and CLICNY are to be purchased by a holding company subsidiary of ACE Limited (ACE) (Hamilton, Bermuda), a large global insurer that provides a diverse mix of life/health, property/casualty and reinsurance products for cash consideration of $2.4 billion. The acquirer is favorably capitalized, diversified by business segment and geographics, maintains the capacity to generate significant earnings and is moderately leveraged. The addition of CICA and CLICNY will provide earnings diversification in a cash producing business, some cost synergies and will support and enhance ACE’s existing distribution channels. The transaction is expected to close by the end of second quarter 2008.
Additionally, Aon signed a definitive agreement to sell Sterling to Munich Re Group (Munich Re) (Germany), a strong player in the global reinsurance market for a cash consideration of $352 million. Munich Re has established a significant international profile and is the largest health and legal expense insurer in Europe. The acquisition of Sterling will provide the opportunity for expansion into the fast growing U.S. senior health market. Sterling’s rapidly growing private fee for service (PFFS) product has an established recognized brand and is in line with Munich Re’s strategy to expand into the U.S. health business. The transaction is projected to close by end of first quarter 2008, subject to regulatory approvals.
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