Oct. 31 (Bloomberg) -- Aon Corp., the biggest insurance broker, said third-quarter profit declined 43 percent amid the slowing U.S. economy and price declines for commercial coverage.

Net income fell to $117 million, or 40 cents a share, from $204 million, or 64 cents, the Chicago-based company said today in a statement distributed by PR Newswire. Earnings from continuing operations, which excludes costs such as severance pay, were 69 cents a share, beating by five cents the average estimate of 13 analysts surveyed by Bloomberg.

Chief Executive Officer Gregory Case agreed in August to buy London-based Benfield Group Ltd. for about $1.6 billion to expand abroad and bolster Aon's reinsurance business. In the U.S., clients are ``under pressure'' to cut their insurance expenses as the economic slump deepens, Case said in August.

``There's no recession anybody dead or alive has seen like this or will see,'' Joseph Plumeri, CEO of No. 3 broker Willis Group Holdings Inc., told analysts on Oct. 23.

Aon fell 16 cents to $38.10 yesterday in New York Stock Exchange composite trading. The stock is down 20 percent this year, lagging behind the 4.6 percent advance of No. 2 Marsh & McLennan Cos. Willis is down 31 percent since Dec. 31. Aon outperformed New York-based Marsh & McLennan and London-based Willis in each of the last three years.

Expenses related to workforce and office-space reductions tripled to about $54 million in the three months ended Sept. 30. The pretax margin at the brokerage declined to 16.8 percent from 17.3 percent, excluding certain items.

Middle East, Europe

Risk and brokerage services revenue advanced 4.4 percent to $1.47 billion, led by a 17 percent gain in the Middle East, Africa and Europe, not counting the U.K. Excluding the impact of acquisitions, foreign exchange and other items, overall brokerage revenue increased by 2 percent, the company said.

Compensation expenses rose 9.4 percent to $910 million at the brokerage business and included a $27 million increase in ``restructuring costs.'' Aon's Cananwill financing business posted a ``significant decline'' and hurt margins, the company said.

Aon's fees have been hurt as construction companies scale back projects and private equity clients make smaller deals, Case said in August. Willis cut its full-year earnings forecast on Oct. 22 after third-quarter results fell short of expectations.

Commercial insurance rates fell 11 percent in the three months ended Sept. 30, according to Washington-based Council of Insurance Agents and Brokers.

Case, hired in 2005, has cut at least 3,200 jobs and sold Aon's underwriting units to focus on the business of matching buyers and sellers of commercial coverage. Aon sold Combined Insurance Company of America to Ace Ltd. in April for $2.56 billion. Earlier this month it agreed to sell AIS Management Group to Mercury General Corp. for $120 million in cash, paring its business related to automobile coverage.

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net.

Last Updated: October 31, 2008 07:30 EDT