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Posted On: Oct. 29, 1997 12:00 AM CST

Not many executives can claim they have stirred up a multibillion-dollar industry quite the way Patrick G. Ryan has over the past year.

The chairman and chief executive officer of Chicago-based Aon Group Inc. is the mastermind behind the purchase and integration of five of the world's 20 largest insurance brokers since last October.

His deal-making not only has touched off widespread consolidation within the industry, but it also has created a global brokerage giant grossing nearly $4 billion in revenues in 1996.

What is now known as Aon Group is really an outgrowth of Ryan Insurance Group, a small managing general underwriting agency that Mr. Ryan created in 1964 at the age of 26.

For 14 years, Ryan Insurance Group distributed specialty credit life insurance products to automobile dealers. Then in 1978, Mr. Ryan acquired four agencies that had been operating under the financial service division of Esmark, a Chicago-based conglomerate, and Mr. Ryan's dream to build a large insurance brokerage distribution began to take shape.

That acquisition, which included Scarborough & Co., propelled Ryan Insurance Agency Group for the first time into Business Insurance's rankings of the largest U.S. brokers, debuting in the No. 19 spot based on a mere $11.6 million in revenues.

Three years later, Ryan Insurance Agency broke into the Top 10 with its acquisition of James S. Kemper & Co., which at the time was the 20th-largest broker.

But it was not until the 1982 deal that Mr. Ryan made with W. Clement Stone, who was president and chief executive officer of Combined International Corp., that Mr. Ryan finally assembled the necessary resources to become a national player in the insurance brokerage industry.

Just months after the merger with Combined was secured, Mr. Ryan, who was named president and CEO of Combined, bought Rollins Burdick Hunter Co. for $109 million, propelling the broker to the No. 7 spot in the rankings, with $118.4 million in revenues.

Mr. Ryan's only other major brokerage acquisition during the 1980s was of Bayly, Martin & Fay International Inc. in 1989. He now looks back and says that he wishes he had been more aggressive in building the brokerage during that time.

He more than made up for lost time during the 1990s, however, with the purchase of several household names in the brokerage industry. Among them were: Hudig-Langeveldt Group B.V.; Frank B. Hall & Co. Inc.; Bain Hogg Group P.L.C.; Alexander & Alexander Services Inc.; Minet Group; Sodarcan Inc.; and most recently, Jauch & Huebener KGaA.

Mr. Ryan, 60, sat down with Associate Editor Sally Roberts recently in his downtown Chicago office to reflect on his career.

How did you come up with the idea to create Ryan Insurance?

I always wanted to be an entrepreneur. I went into the insurance business out of college.

I wanted to have my own company, so I tied knowledge of the retail automotive industry that I gained through my father's business growing up into the insurance experience that I had.

The goal then was to really be a consultant/broker/service provider to the retail automotive industry.

We focused exclusively on servicing the automotive industry from '64 to '78. Then the idea was to take that same concept, of specialization and brokerage distribution, into other industries.

So the second industry we focused on was banking, which came through Scarborough. The goal was to then build the brokerage service distribution.

I don't think many people realize Aon Corp. has brokerage roots.

People miss that part because they focus on the fact that we had underwriting companies. They miss the continuity that we started as a brokerage and stayed with it. But because we merged in '82 with Combined, that threw people off.

The strategy behind Combined was that we saw it as the vehicle to fund our dream.

It had a $500 million shareholder equity and no debt and $100 million in cash flow.

You've completed so many acquisitions in your career, what was the most strategic deal behind Aon's current position?

There are three deals that I would highlight as critical to our present position. The first one was, as soon as we merged with Combined -- a month later because we now had the money -- we bought Rollins Burdick Hunter, and that took us from a local, relatively small broker to one with national presence. The next was in '91 with Hudig-Langeveldt, because that was the decision we made to globalize the brokerage business and to make the total commitment to move forward in a very aggressive way. That acquisition launched us in Europe and in the Far East. And then the next year, the acquisition of Frank B. Hall. That deal gave us the presence in the U.S. and in Europe to become a major player.

Was there one deal that was most exciting for you personally?

In different ways, I think the Hudig-Langeveldt was the most exciting because it got us into all these different cultures and then proved to me that we were capable of building a global business. Up until then, we were basically adding to a domestic business. Frankly, in six years, we went from doing business in one country to doing business in over 100 countries. Hudig-Langeveldt was the platform behind that.

Are you sorry you couldn't buy Corroon & Black?

Sure. People always say I'm too stubborn to admit that, but Corroon & Black was a very good fit for us. Together, we would have been a huge mid-market player. I felt Corroon & Black and what was then RBH fit together very, very well, culturally and strategically. It's the only deal we missed out on.

Are you done buying?

No (laugh).

You have quite a bit of experience in taking on several large acquisitions at one time. What are the keys to making multiple acquisitions?

The first one is respect for cultural differences -- the cultural differences within the company or companies and the cultural differences due to nationalities. I think we have had the ability to respect those cultural issues and bring them together to make them work.

Another key is a belief and respect that each company has its strength and to identify those strengths and bring them together as decisively as possible. Indecision and uncertainty is very difficult for the human quotient to deal with.

Thirdly, and very importantly, is to deal with the weaknesses that you've got. Either decide to eliminate them or invest very quickly.

Does brokerage size really matter in today's market?

Size gives you scale, which translates into efficiency; size often gives you resources; size often gives you geographical reach. So size does matter. But is it really relevant if you're No. 1, 2 or 3? Probably not. But do I believe it matters if you're second-tier size? Personally I do believe it matters, and I know people who are of that size that would argue like hell to say that it's not a relevant issue. I would disagree.

Has Aon reached the critical mass you think a broker needs in order to thrive in today's market?

Oh, sure. But that doesn't mean we don't want to be larger. We don't have to get larger for the sake of gaining efficiencies, but there are parts of the company that are not large enough.

Such as?

Latin America, parts of Europe and parts of the Far East.

Is there anything that you would do differently since forming Ryan Insurance?

Oh, I think I would have accelerated the growth of the brokerage more in the mid-'80s. We bought Life of Virginia in the mid-'80s. Although that was a good investment for us, I was trying to reward our shareholders by giving them balance with brokerage, accident and health, and life. So I was proud of the balance we had with the three distinct businesses. Although financially (Life of Virginia) worked out for us, because we bought it and made a lot of money selling it, probably, if I had the chance to do that all over again, I would not have made that move and would have moved more aggressively earlier into the brokerage business.

It was a different market then. Do you think you could have been as aggressive as you have been since the market turned soft?

In retrospect, at the time it probably wouldn't have been as easy to do. Maybe that's why I didn't do it. The brokerage industry was very good in the mid- and late '80s coming off of the big price increases in '86. So it's easy for me to say I should have. When I think back, though, we couldn't do a lot of those deals. We couldn't have done Hall then; we couldn't have done A&A; I tried to get Corroon in '90 and couldn't get it done. So maybe I'm being a little too harsh in that retrospective.

If you were not in the insurance business, what would you be doing?

My sort of fantasy was always being a trial lawyer. . .matching wits with some other guy. But I really think I would be in business. I almost went into the real estate business.

What stopped you?

It was right before I started Ryan Insurance and went off to visit friends in California. Real estate was booming in Southern California, and I thought, "God, I could do that." So I interviewed for a job out there and got it. When I came back to get my things, I called a friend of mine, and he said: "Don't make a move. I've got this great idea." He and I and some other people were going to start a life insurance company. Well, I went to my first meeting with these guys and they couldn't even agree on where they would have the second meeting. But, by this time I'd given up the job, and I was back here and Southern California didn't seem as appealing.

Who has been the most influential person in your career?

My wife and my family. I love what I do, and in doing that, it takes a lot of time and a lot of focus. Therefore, you need people to understand and do more than accept it. . .they need to encourage it because they know that it is part of you, rather than fight it. I've been a beneficiary of that. That's been very important. If I didn't have that, it would be very difficult.

For people who do not know you, what would they find most surprising about you personally?

That I'm not as aggressive as I seem. People always think that I'm so aggressive. I appear to be impulsive because I do things quickly, but I think things through very carefully before I do anything.

Do you personally enjoy the limelight that has come with Aon's growth?

I think I'm used to it. I honestly don't seek it out. But I guess I'm accustomed to it because running a large public company gives you certain exposure, and then being a meaningful participant in the insurance industry gives you identity. I've always been active in different external affairs, so that gets you exposure, too. So after a while you take it as it comes. I think, frankly, to a certain degree I have a responsibility for Aon, its shareholders, its employees and its clients to have the company recognized, but for personal sense of gratification, I don't seek it out.

Do you have any mentors?

Very early I had two mentors: One was John Swearingen (retired chairman of Standard Oil Co.). He is just a guy if you had a situation, you could explain it to him and he'd give you very sound advice. In the early days, there was a guy named Jim Rutherford, who was 45 years older than I was, so he was close to being able to be my grandfather.

He was head of Prudential Mid-America and a well-known Chicago businessman. He sort of mentored me in the early days. He was from Arkansas. . .one of those wise men who you just go to with a question or a problem.

I've had very good friends who are not so much mentors as much as they are confidants and advisers. And I seek people's advice.

What's the biggest accomplishment in your career?

Aon, because I am a builder. What drives me is the creation of a company with great value to its clients, great importance to its employees and great importance to its shareholders and to its community.

What are you doing when you're not working?

I spend a lot of time with my family. We travel. We have a home up in Wisconsin which we go to. I like to read and snow ski. I like water sports.