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Aon is a Gaelic word meaning "unity." When the former Combined International Corporation adopted Aon as its name, in 1987, the word was chosen to represent one of the most diversified groups of insurance companies in the United States. Through its subsidiaries the Aon Corporation underwrites a broad line of accident and health insurance, life insurance, and specialty property and casualty insurance, and offers brokerage, reinsurance, employee benefits consulting, and insurance-premium finance services. The holding company grew rapidly through acquisition during the 1980s.
The corporate structure of Aon originated in 1980, when the Combined International Corporation was set up as a holding company for the acquisition-hungry Combined Insurance Company of America. The latter company had been formed in 1947 through the merger of the Combined Mutual Casualty Company of Chicago and Combined Insurance Company of America of Pennsylvania. Both companies belonged to self-made millionaire and self-help proponent W. Clement Stone. Stone controlled a number of insurance companies operating in various states at the time. He had begun his insurance career at the age of 16.
W. Clement Stone was born on Chicago's south side in 1902. His father died when he was two years old, and by age six, Stone was earning money as a paperboy to help his dressmaker mother. At age 13 the entrepreneurial Stone had his own newsstand. At 16 he embarked on an insurance career, selling policies for an agency his mother had started in Detroit, Michigan.
In 1922, at the age of 20, W. Clement Stone set up a Chicago-based insurance agency with a $100 investment. During the 1920s the Combined Registry Company, which acted as agent for about six insurers, grew rapidly, employing 1,000 agents nationwide by 1930. The Depression hit the company hard, however, and Stone was forced to reduce the number of agents to 135. In 1939 Stone acquired his first insurance company, the American Casualty Company of Dallas, later known as the Combined American Insurance Company of Dallas. That same year he organized the Combined Mutual Casualty Company of Chicago, followed by the Combined Casualty Company of Philadelphia, renaming it the Combined Insurance Company of America, and paving the way for the 1947 merger.
When the Combined Insurance Company of America got its start just after World War II, the company wrote accident and health insurance, hospitalization, and non-cancellable accident and health insurance. An army of door-to-door salesmen carried Combined's policies direct to homes and businesses. At the end of 1947 Combined had assets of $2.2 million.
In December 1949 the company acquired the Boston Casualty Company, an accident and health insurer, and renamed it Hearthstone Insurance Company of Massachusetts. In 1954 Combined acquired the First National Casualty Company of Fond du Lac, Wisconsin. During the 1950s, Combined and its subsidiaries grew substantially. Between 1949 and 1959, premiums increased an average of 17% annually while assets jumped from $2.9 million to $20.3 million. The company relied on direct sales of low-cost accident and health policies, which were a good risk for Combined.
W. Clement Stone's personal philosophy--the "positive mental attitude," or PMA--was the cornerstone of the company's day-to-day operations. Stone, wearing a flamboyant bow-tie, was known to enter the boardroom shouting, "is everybody happy?" Salespersons lived by slogans like "what the mind can conceive and believe, the mind can achieve" and "when you have nothing to lose and everything to gain by trying, by all means try." Employees were encouraged to greet each day with the upbeat maxim "I feel healthy. I feel happy. I feel terrific."
Sales pitches were memorized and repeated by the company's door-to-door representatives. W. Clement Stone remarked years later: "it's impossible to fail when you follow this step-by-step set-up." Indeed, Combined Insurance Company's sales continued to expand throughout the 1960s. By 1969 Combined's written premiums totaled $187 million, up from $27 million a decade earlier; assets were $225 million, up from $20.3 million.
In 1965 Combined began selling low-cost, low-benefit life insurance, which gradually became a significant segment of the company's business. In 1968 the company acquired the Commerce and Industry Insurance Company of New York, a fire and property insurer that sold to preferred commercial, institutional, and industrial clients. The Commerce and Industry shares were exchanged for 50,000 shares of the American Home Assurance Company of New York six months later.
In January 1970 Matthew T. Walsh, former executive vice president and international sales manager, became president of Combined Insurance when the 67-year-old W. Clement Stone assumed the new offices of chairman and CEO. Walsh had been with the company since 1946. At the same time, Clement Stone, the 41-year-old son of the founder, became president of Combined's European operations. Although W. Clement Stone stepped down from the day-to-day running of the company, his influence directed the company.
Throughout the next decade, Combined pushed overseas. Having already penetrated English-speaking markets like Canada, Great Britain, Australia, and New Zealand in the 1960s, Combined entered West Germany in 1977, France in 1979, and Japan in 1980. Combined tailored its policies to fit conditions in these countries: in New Zealand, for example, where socialized medical programs cover virtually the entire cost of hospitalization and doctors' bills, Combined sold supplemental policies that protect against loss of income in case of illness or accident. By 1980 17% of the company's revenues came from outside the United States.
In December 1971, just two years after assuming the presidency of Combined Insurance, Matthew T. Walsh resigned. Walsh said he was leaving because his years at Combined had given him "sufficient means to do all the things I've always wanted to do while still young enough to enjoy them." W. Clement Stone resumed the president's chair until a replacement could be found. Clement Stone took the reins as president and chief operating officer in 1972, and CEO in 1973.
The recession of 1973 sent stock prices plummeting. Between 1970 and 1977 Combined's price dropped about 66%. Nevertheless, growth continued at an impressive rate during the decade. Because Combined focused on the low end of the insurance market, the company did not suffer from problems that faced other insurers during the late 1970s. While those companies struggled with skyrocketing health costs and accident settlements, Combined prospered. Between 1969 and 1979 assets grew to $1.57 billion--about 16% annually.
By the end of the 1970s, Combined Insurance Company was looking for acquisitions. In 1980 the company formed the publicly owned Combined International Corporation to act as a holding company, in order to avoid state-by-state regulation. The holding company was monitored by the Securities and Exchange Commission and was not subject to scrutiny by each state's insurance commission.
In 1981 the new Combined International Corporation made its first acquisition when it bought the Union Fidelity Corporation along with its Nashaming Valley Information Processing unit, for $105.5 million. Union Fidelity was an accident and health insurer, which excelled at direct-response marketing and sold 75% of its policies through direct-mail and newspaper campaigns. The unit was expected to give Combined's door-to-door marketers a needed boost. Combined suffered from the rising costs of recruiting and maintaining a large battalion of field representatives, and the company's domestic sales had been flat for the two years prior to the acquisition.
In March 1982 Clement Stone abruptly resigned as president and CEO of Combined, citing personal reasons. His father once again resumed control of the company. After his resignation, Clement Stone received a $3.4 million consulting contract.
At age 79, W. Clement Stone was once again caretaker of the company he had founded. At the same time, the company was troubled by stagnation in domestic premiums. Although the slump in growth was offset in the short-term by excellent investment results, a plan to deal with rapidly changing markets was needed.
Combined solved its leadership problems with the acquisiton of the Ryan Insurance Company in August 1982. Combined spent $133 million for the 18-year-old specialty insurer and brokerage, which had been a pioneer in credit life insurance for auto dealerships and extended mechanical warranty insurance agreements. Founder Patrick G. Ryan then became president and CEO of Combined. Stone remained chairman. Although W. Clement Stone had called an unexpected adjournment which lasted for five hours at the special shareholders meeting which had been called for the purpose of approving the acquisition, Stone finally approved the deal, and Combined at last had a new leader.
Pat Ryan's management style differed considerably from W. Clement Stone's. Ryan, while himself a good motivator, was generally described as less flamboyant and more diplomatic. The new CEO of Combined demonstrated his approach by announcing a major acquisition just two months after taking charge of the company's operations. Combined purchased the Chicago-based insurance brokerage Rollins Burdick Hunter Company for $109 million. Rollins Burdick, which was well known for its large corporate clients, absorbed Combined's other brokerage operations, making it the eighth-largest insurance broker in the United States. The acquisition provided Combined with a source of fee income that was not readily susceptible to decline because of the less competitive nature of corporate insurance.
In 1982, although revenue rose 27%, net earnings dropped 19%. Ryan began to cut costs and integrate Combined's greatly diversified operations. In 1983 revenues grew 18% and operating earnings jumped 47%. The Ryan Insurance subsidiary stretched its extended warranty insurance to appliances, and Union Fidelity took advantage of the growing need for supplemental health insurance.
In April 1986 Combined bought the Life Insurance Company of Virginia for $557 million. The acquisition further widened Combined's product line, notably adding an array of interest-sensitive universal life products for upscale markets.
In January 1987 the Rollins Burdick Hunter unit bought five regional operations: Allen, Hart, Franz and Zehnder of Los Angeles; Schroeter, White and Johnson of Oakland, California; Pilot Insurance Agency of Winston-Salem, North Carolina; Todorovich Agency of St. Louis, Missouri; and the agency operations of Springhouse Financial Corporation of Philadelphia, Pennsylvania.
In March 1987 Combined International Corporation's shareholders voted to change the name of the company to Aon Corporation. Patrick Ryan said the name change was necessary to eliminate confusion between the holding company and its subsidiary, Combined Insurance Company of America.
Continuing its diversification, Aon bought the employee-benefits consulting firm Miller, Mason and Dickenson for $12 million in the summer of 1988, and in September bought the nation's ninth-largest reinsurance agent, Reinsurance Agency.
In January 1989 Aon restructured its subsidiary Rollins Burdick Hunter Company, setting up a holding company to oversee four units: Rollins Burdick Hunter Company, the brokerage; Rollins Specialty Group, a newly created unit concentrating on brokerage services for financial institutions, associations, and affinity groups; Miller, Mason and Dickenson, the newly acquired employee-benefits consultant; and Aon Risk Services--a reinsurance brokerage operating through Aon Reinsurance Agency, formerly Reinsurance Agency.
As Aon entered the 1990s the company planned to continue to grow through the acquisition of carefully selected companies, and continued to rely on its existing lines of insurance. Since its founding in 1947 the group has grown from a modest accident and health insurer into one of the most diverse insurance groups in the United States. Aon's management is highly regarded, and its marketing of unique insurance products can be expected to continue in the future.
Principal Subsidiaries: Combined Insurance Company of America; The Life Insurance Company of Virginia; Rollins Burdick Hunter Group, Inc.; Ryan Insurance Group, Inc.; Union Fidelity Life Insurance Company.
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