Aon Tumbles After Restructuring

Updated from 11:33 a.m. ET

Shares of Aon(AOC), the world's second-largest insurance broker, plunged 21% Thursday after company officials said they plan to cut 3,000 jobs and take up to $325 million in charges, then angered analysts by declining to give specific predictions of future profits.

The Chicago company also reported third-quarter profits Thursday of $139 million, or 53 cents per share, a 1% gain over the $138 million, or 52 cents a share, it reported in the year-ago quarter. The results were a penny per share short of the consensus predicted by analysts polled by First Call/Thomson Financial.

Aon said it would take between $250 million and $325 million in pretax charges for the reorganization, recording most of the charges in the fourth quarter of this year and the first quarter of 2001. The charges are mostly for severance packages.

In a conference call with analysts, company officials said they plan to cut about 6% of Aon's 50,000-strong workforce. The cuts would affect senior executives and midlevel managers as well as lower-level employees, they said. They expect cost savings of $150 million to $200 million per year before taxes once the restructuring is done. Temporary revenue shortfalls are possible, said Patrick Ryan, the company's chief executive. "It can often times be disruptive in terms of production," he said, adding that investors would have to trust the company's managers, who he said will do their best.

But pressed for specific profit predictions, company officials balked. After a second analyst requested the numbers during a conference call, Ryan said: "You all make your living analyzing. You shouldn't make your living having us tell you what we're going to do."

Asked by one analyst how this restructuring would be different from previous ones and what the company would do if the plan fails, Ryan said past charges and job cuts were technically the result of consolidation after acquisitions of other companies, not restructuring efforts.

Mark Lane, analyst for William Blair, said the company's decision not to offer specific earnings guidance was understandable because "there are so many different variable."

"It's a disappointment," Lane said. "That would have helped their credibility."

Like several other analysts, Lane lowered his rating on the stock after the announcement. His new rating is hold, and his firm has done no recent underwriting for the company.

Lane said the problems seem specific to Aon because the company has been a leading consolidator in the industry for several years.

"Not until the last couple of years have they tried to figure out what it's going to take to do it efficiently, and they've misjudged that," he said.

Aon finished Thursday regular trading down $7.44, or 18%, at $33.19.