UPDATE 1-Aon to sell AIS Management unit to Mercury General

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Oct 15 (Reuters) - Aon Corp (AOC.N) said it agreed to sell its Auto Insurance Specialist Management Group unit to auto and home insurer Mercury Insurance Group (MCY.N) for $120 million in cash as part of its restructuring plans.

In addition, the deal also includes a potential earn out of up to $34.7 million payable over the two years following the close of the deal, the global insurance broker said in a statement.

The deal, which is expected to close in the first quarter of 2009, includes business transacted under the Auto Insurance Specialists Inc, PoliSeek and Aon Recreation Insurance brands.

AIS Management Group was placed into discontinued operations for the third quarter, the company said.

Shares of Aon closed at $39.97 Tuesday on the New York Stock Exchange. (Reporting by Sweta Singh in Bangalore; Editing by Deepak Kannan)