September 7, 2008 / 5:59 PM / 11 years ago

Aon remains on the lookout for further buys

MONTE CARLO, Sept 7 (Reuters) - Aon Corp AOC.N sees no threat of a counterbid following its agreed 844 million pound ($1.48 billion) bid for reinsurance broker Benfield BFD.L and remains on the lookout for further acquisitions, senior executives from the firm said on Sunday.

Asked at a press conference at an industry meeting in Monaco whether he feared rivals would seek to trump its all-cash bid for the UK-based Benfield, Aon Re Global Chief Executive Andrew Appel said, “No, I’m not worried.”

Rival Marsh & McLennan Cos Inc (MMC.N) ruled out making a bid for Benfield.

Appel said it was too early to say whether any jobs may be lost as part of the takeover, which cement Aon’s role as the world’s largest reinsurance broker, by swallowing its third-placed rival.

Aon Re, the re-insurance arm of Aon Corp and Benfield each have large offices in London, the center of the European insurance risk market, and a substantial number of employees.

Aon also said it would continue to make more acquisitions if it found attractive targets, having already bought the reinsurance operations of U.S. rival Arthur J Gallagher (AJG.N) in February for an upfront fee of $30 million.

“If it makes sense to acquire companies that fit our strategy then we would absolutely take a look at them,” said Mike O’Halleran, executive chairman of Aon Re Global.


Separately, Aon said reinsurers would have to be hit with very heavy catastrophe claims of up to $50 billion this year for risk prices to substantially rise at the upcoming price renewals, Aon said on Sunday.

Reinsurers would need to be hit by as much as $25 billion in claims to even prevent prices from sliding further, Aon said.

The reinsurance industry has rapidly replenished its capital base after paying out tens of billions of dollars from devastating hurricanes that struck the southeastern United States in 2005.

The past two years has seen them post healthy profits, thanks to the combination of there being no major catastrophes, high prices following the 2005 disasters, and high investment returns.

As competition has increased for business, reinsurers have cut prices, but as they remain at healthy levels, further rate falls may occur, analysts argue.

Aon predicted that if the reinsurance industry was to experience another light year of catastrophe claims then prices for U.S. reinsurance risks could fall by up to 20 percent at the crucial end-of-year renewals, when many insurers traditionally buy their annual risk contracts from reinsurers.

Insurers and reinsurers are meeting in the Mediterranean resort to kick off negotiations about how much they will pay for cover against that are too big for them to keep on their own balance sheets. (Editing by Leslie Gevirtz)

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