The Issue: Many Troubles for the New Boss

Gregory Case had his work cut out for him when he took over as CEO of the insurance broker. His steady hand is paying off

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How do you revive a company that has been humiliated by regulators, deserted by investors, and is suffering from management disarray? That was the challenge for ex-consultant Gregory C. Case, who was recruited from McKinsey & Co. to take over beleaguered Aon (AOC) in 2005.

Case came to Aon as chief executive at a time when a calm and steady hand was sorely needed. Patrick G. Ryan, the big insurance broker's founder and then-CEO, was planning to retire. Aon had been forced by attorneys general in New York and Illinois to pay out $190 million to settle allegations that the company was routinely accepting some $200 million a year in questionable revenue. The regulatory attack, launched against Aon and such big rivals as Marsh & McLennan (MMC) and Willis Group Holdings (WSH), was aimed at eliminating so-called contingent commissions, payments made to the brokers by insurance companies as rewards for placing business with them. Critics said such commissions tainted the brokers' judgment in finding the best deals for corporate clients.

Case's first task was to reassure clients and investors that Aon was going to do right by them. He did so with scores of client meetings, racking up lots of frequent-flier miles as he visited companies all around the world. He also sought to assure Wall Street that the company's finances would be solid, in spite of the loss of the dubious revenue. Case was betting that Aon, which now boasts some $7.5 billion in annual revenue, could make it up with other, growing parts of its business, such as consulting and employee benefits. He played his hand well with analysts and investors: The company's stock, trimmed to below $20 a share in the fall of 2004, is now worth more than double that. "This is about the opportunity," says Case. "Clients have incredible needs and Aon is in a great position to help them."

A New Deal with Regulators

To make sure Aon's finances would be secure, the ex-consultant also launched an efficiency campaign. He found lots of redundancies, born of the more than 400 acquisitions Aon had made, and he set to trimming. Through a series of restructurings, Case cut around 5,700 jobs, which together with reductions from some asset sales have shrunk the company workforce to 36,000. He also sold off some units that didn't fit into the company's core missions of insurance brokerage and consulting. Cutting the expense base saved tens of millions of dollars, another step that cheered investors. His aim: "Invest those savings back into the client-facing parts of the business."

Case also sought to place Aon as a growing company again—a move that in early June got a boost from a deal it made with regulators. After holding back on acquisitions of smaller insurance brokerage rivals—purchases that could bring tens of millions of dollars Aon's way—the company can buy such firms again. Because Aon was barred from collecting the contingent commissions, it couldn't acquire smaller rivals that depended on them. Now insurance regulators in New York, working with the state's Attorney General, have cleared the way for more deals by letting Aon and its rivals acquire brokers that collect such commissions so long as they phase out the commissions over three years.

Aon, which on Case's watch has become the world's largest insurance broker, now has the wind at its back. But the CEO can't take anything for granted. His toughest rival, No. 3-ranked Willis, has already moved to buy a smaller rival, Richmond (Va.)-based Hilb Rogal & Hobbs (HRH) in a $2.1 billion deal announced June 8. Industry consolidation, delayed by the regulatory headaches, may now move ahead in earnest and Case's task will be to see that Aon doesn't miss out.

Joseph Weber is BusinessWeek's chief of correspondents, based in Chicago.