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Reactions Weekly News
October 1, 2004
Pat Ryan, chief executive of
Aon, the world's second biggest
broker, said this week that he plans to step down as soon as a suitable
successor is found. Ryan's departure could signal the dawn of a new strategic
direction for the company, according to analysts.
The company also announced
that Michael O'Halleran,
Aon's president and
chief operating officer, has ruled himself out of the running
for the top job and is stepping down from his existing
responsibilities. He becomes senior executive vice-president of
the company with responsibility for its global reinsurance
brokerage, its wholesale brokerage and managing its underwriting
activities.
O'Halleran's
unwillingness to take over will probably force
Aon to recruit an outsider,
say analysts. But they also believe the company's shareholders
may be applying pressure to the company to bring in new blood to
reinvigorate the company's performance and strategy.
“The fact that the
president and chief operating officer is not a candidate appears
to show that the company wants to bring outside blood to the
company to reshape Aon,”
says Robert Lieblein,
president and managing principal of WFG Capital Advisors, an
investment bank.
Ryan, who is 67, has headed
Aon since it was
formed in 1982 when the Ryan Insurance Group merged with
Combined International Corporation. Under his leadership the
company has grown into the world's second biggest insurance
brokerage firm.
But, despite its considerable
market share, Aon's
performance has lagged behind that of its peers. And some
analysts believe Ryan's retirement may reflect pressure on the
company from its board and shareholders to improve the firm's
performance.
“Aon is a respected company
and Pat Ryan has done well in building it into the second
largest brokerage firm,” says Lieblein.
“But the industry is going through big changes.
Aon's organic growth rate
has been flat compared to the 3% and 4% growth rate of its
competitors. I'd not be surprised if there had been pressure on
the company from Wall Street and the board to shift the
company's strategy.”
Aon's
stock price increased by 5% following the news of Ryan's
departure as chief executive.
Mike Dion,
analyst at investment bank Sandler
O'Neill, says it would be a good move to bring an outsider into
the company. He points to insurer Chubb's success in hiring of
industry outsider John Finnegan, who replaced Dean O'Hare as
chief executive of Chubb in 2002. Finnegan joined Chubb from
General Motors Acceptance Corporation where he was chairman and
president.
“Investors
were reluctant at first to welcome Finnegan. But he proved his
worth. The company has performed better and its stock price has
improved,” says Dion. |
