S&P lowers Aon outlook to stable

Standard & Poor's said it revised its outlook on Aon Corp. to stable from positive and affirmed its BBB+ counterparty credit and senior unsecured debt ratings.

Although Aon continues to enhance its operating performance through expense and revenue initiatives, the pace of improvement, particularly in organic growth, has resulted in underlying operating performance, relative to its debt level, as measured by adjusted fixed charge coverage from continuing operations of 5x as of Sept. 30, 2006, below our previous expectation of 6x by year-end 2006, the agency said.

Despite Aon's continued success in offsetting the adverse impact of lost contingent commissions, its 2% organic growth in the risk and insurance brokerage unit for the nine months ended Sept. 30 is lower than that of many of its peers and is the primary roadblock to the expected material improvement in profitability that was reflected in the previous outlook, S&P noted.

The agency said it believes improvement in organic growth and resultant profitability will be especially challenging in the coming year as a softening insurance pricing environment will adversely affect overall industry growth.

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