S&P CORRECT: Aon Corp. and Related Units Ratings on WatchNegative

Apr 20, 2001, 01:00 ET from Standard & Poor's

    NEW YORK, April 20 /PRNewswire/ -- A version of this press release was
 issued earlier today. This version clarifies some of the details of the Aon
 transaction.
 
     Standard & Poor's today placed its ratings on Aon Corp. (Aon) and related
 subsidiaries (see list) on CreditWatch with negative implications.
     This rating action followed Aon's announcement that it is planning to
 spin-off its underwriting businesses to existing shareholders through a new
 holding company. The underwriting businesses that would be affected by this
 transaction include Combined Insurance Co. of America (CICA), Combined Life
 Insurance Co. of NY (CLICNY), Virginia Surety Co. Inc., London General Ins.
 Co. Ltd., and Aon Warranty Group Inc.
     Standard & Poor's will continue its ongoing discussions with Aon
 management and provide appropriate updates on the status of these ratings as
 the details of the transaction are finalized.
     Standard & Poor's has concerns that note holders of Aon paper will lose
 the benefits of diversification and capital support afforded by Aon's
 ownership of the insurance operations. Historically, the underwriting
 businesses have contributed a significant source of cash flow to fund the
 parent's aggressive acquisition, financing, share repurchase, and dividend
 needs. As of year-end 2000, the underwriting businesses contributed 34% of
 Aon's revenues and 37% of its pretax earnings. These subsidiaries -- which
 will move to a new holding company, Combined Specialty Corp. -- carry and will
 continue to carry virtually all of Aon's bond, preferred, and equity
 investments (including limited partnerships) on their balance sheets.
     The ratings on CICA and CLICNY were placed on CreditWatch negative to
 reflect the uncertainty of how the spun-off organization will be capitalized,
 managed, and operated as a separate legal entity. Among these concerns is the
 capital adequacy of the insurance group, including Virginia Surety Co. Inc.
 and the use of financial leverage in the new organization.
     Notwithstanding these concerns, Standard & Poor's believes Aon is well
 positioned in its insurance brokerage, consulting, and underwriting
 businesses. -- CreditWire
 
     OUTSTANDING RATINGS PLACED ON CREDITWATCH WITH NEGATIVE IMPLICATIONS:
 
     Aon Corp.
       Senior debt rating                      A+
       Preferred stock rating                  A-
       Commercial paper rating                 A-1
     Combined Insurance Co. of America
       Long-term counterparty credit rating    AA
       Short-term counterparty credit rating   A-1+
       Financial strength rating               AA
     Combined Life Insurance Co. of NY
       Counterparty credit rating              AA
       Financial strength rating               AA
 
 

SOURCE Standard & Poor's
    NEW YORK, April 20 /PRNewswire/ -- A version of this press release was
 issued earlier today. This version clarifies some of the details of the Aon
 transaction.
 
     Standard & Poor's today placed its ratings on Aon Corp. (Aon) and related
 subsidiaries (see list) on CreditWatch with negative implications.
     This rating action followed Aon's announcement that it is planning to
 spin-off its underwriting businesses to existing shareholders through a new
 holding company. The underwriting businesses that would be affected by this
 transaction include Combined Insurance Co. of America (CICA), Combined Life
 Insurance Co. of NY (CLICNY), Virginia Surety Co. Inc., London General Ins.
 Co. Ltd., and Aon Warranty Group Inc.
     Standard & Poor's will continue its ongoing discussions with Aon
 management and provide appropriate updates on the status of these ratings as
 the details of the transaction are finalized.
     Standard & Poor's has concerns that note holders of Aon paper will lose
 the benefits of diversification and capital support afforded by Aon's
 ownership of the insurance operations. Historically, the underwriting
 businesses have contributed a significant source of cash flow to fund the
 parent's aggressive acquisition, financing, share repurchase, and dividend
 needs. As of year-end 2000, the underwriting businesses contributed 34% of
 Aon's revenues and 37% of its pretax earnings. These subsidiaries -- which
 will move to a new holding company, Combined Specialty Corp. -- carry and will
 continue to carry virtually all of Aon's bond, preferred, and equity
 investments (including limited partnerships) on their balance sheets.
     The ratings on CICA and CLICNY were placed on CreditWatch negative to
 reflect the uncertainty of how the spun-off organization will be capitalized,
 managed, and operated as a separate legal entity. Among these concerns is the
 capital adequacy of the insurance group, including Virginia Surety Co. Inc.
 and the use of financial leverage in the new organization.
     Notwithstanding these concerns, Standard & Poor's believes Aon is well
 positioned in its insurance brokerage, consulting, and underwriting
 businesses. -- CreditWire
 
     OUTSTANDING RATINGS PLACED ON CREDITWATCH WITH NEGATIVE IMPLICATIONS:
 
     Aon Corp.
       Senior debt rating                      A+
       Preferred stock rating                  A-
       Commercial paper rating                 A-1
     Combined Insurance Co. of America
       Long-term counterparty credit rating    AA
       Short-term counterparty credit rating   A-1+
       Financial strength rating               AA
     Combined Life Insurance Co. of NY
       Counterparty credit rating              AA
       Financial strength rating               AA
 
 SOURCE  Standard & Poor's