Aon UK’s chief executive may be gregarious. But he avoids too much talk about the acquisition of Benfield. Tom Broughton met him.

Peter Harmer was en route to Chicago when he heard AIG was in trouble. The moment the flight landed, he faced a dilemma: should he jump on the first plane back to the UK, as clients jammed the Aon switchboard? Or stay at the group’s Chicago headquarters to deal with the crisis direct?

“It was a case of being damned if you do and damned if you don’t,” he says two months later

in his City office on Devonshire Row. “I didn’t want to get caught on a plane, so it was better to stay in the US and get a first-hand understanding of how we intended to deal with the crisis.”

He has now turned his attention back to his own business. A no-nonsense Aussie who slips into corporate speak if you let your guard down, he meets Insurance Times following one of the biggest acquisitions in the sector’s history – the $1.75bn (£935m) bagging of Benfield – and outlines his plans for the UK’s No 1 broker.

There are big, if rather hazy, changes afoot. But Harmer, who turns 48 today, can’t ignore the financial crisis, so neatly encapsulated by that agonising plane ride back in the autumn. Within hours of landing, he had got the troops into action. “Situation rooms” were set up on both sides of the Atlantic and the senior Aon team hit the phones in an attempt to reassure global clients and offer them alternative insurers if needed; there were plenty of offers.

Aon had to get its own house in order, too. Harmer says the group had more than $8bn of business exposed to AIG (see box, right). There was no contingency plan for an event this big. “It was clear that AIG took everyone by surprise,” he says. “But largely clients in the UK were reassured by the US Fed package, very few switched away. We’ve viewed the crisis at AIG as an opportunity. But it certainly focused everybody.”

The AIG crisis couldn’t have come at a worse time for the chief executive, an Aon lifer. It erupted just as he was trying to step back from the day-to-day business, to plan some big changes. He took the helm in January 2007 after a career with the group in Australia. It was a difficult time for Aon and global brokers generally. The dressing-down they got from the US regulator after the Spitzer investigation was still ringing in their ears and, with contingent commissions gone, Aon had to overhaul its business model.

And then came that Benfield deal, announced in August. It made headlines worldwide but, with rumours of discontented staff and questions about the price tag, Harmer doesn’t seem comfortable chatting about it.

The first employee advisory meeting with Benfield staff is scheduled for today and Aon has confessed it needs to slash £65m – which Harmer insists is a realistic target – off the Benfield cost base. This is likely to result in hundreds of job losses in the back office, but client-facing operations should remain unscathed.

Aon paid $1.75bn for Benfield after fighting off fierce competition from Marsh just before the depth of the slowdown became apparent. The deal gives Aon control of an estimated 45% of revenues in the reinsurance broking market.

Now the economic crisis is in full bloom, does he think Aon paid too high a price for Benfield? “Too much?” says Harmer, surprised antipodean tones in full evidence. “It’s a very good buy at $1.75bn. The market thinks it’s a very good buy. Not just the analysts’ reports, but look at its clients and its share price. It has been very resilient.”

It’s said with a smile, but it doesn’t answer the question – Harmer’s good at that. So, put another way, if Benfield were to be acquired at today’s prices, would the same price have been paid? He pauses before replying (and the Aussie accent steps up): “My dad used to say to me, if your aunty was a man, she’d be your uncle.” His deadpan face crumples into spontaneous laughter – a signal to back off, perhaps.

Harmer is savvy as well as gregarious. He has developed a reputation for resolving conflicts at Aon and as chairman of the Lloyd’s Market Reform Group, although he is probably too busy to give his full attention to the group at present.

His days are filled with the mission to reform Aon and he is reviewing the business’ structure. Are there jobs on the line? “It will impact on all of our staff, but I want to be clear that this is a growth story,” he says in another neat sidestep.

The plan is to reposition the way Aon manages its clients. “At the beginning of last year, it [the problems] gave us an opportunity to say, ‘What does tomorrow look like?’ instead of, ‘How do we get through today?’ Now we’re looking to change our business model to reflect the way we’re actually doing things.”

Harmer says he wants the business to reflect the needs of clients as well as the changing market. He points to the drying up of discretionary insurance purchases and explains there is the beginning of a “medium-term contraction” as the economic downturn takes grip. He reckons Aon can exploit this. “Many companies are realising the systemic nature of some of their risk exposures and realise the need for getting more analytical services,” he says.

“Brokers have pretty much become glorified product resellers. The advice they typically gave clients has been shaped by the limitations or the features of the products. That may explain why there has not been any real innovation in the way that we look at risk.”

It sounds like pretty corporate stuff but, reading between the lines, Aon is planning to better market itself as an adviser to its corporate clients, and invest in risk management and strategic advice rather than simply flogging policies. This will include a clear range of segmented services, which will take about 12 months to roll out.

He predicts a much tougher regulatory environment and expects a high level of scrutiny around capital adequacy, especially for larger firms. But he maintains Aon has an appetite to make more acquisitions if it can find businesses that provide services its clients need.

He points to the recent acquisition of the specialist motor broker Footman James as “along the lines” of the type of company or “additional service” that he intends to target. Harmer says bafflingly that the new Aon business model has been built around the concept of “advice plus transaction equals value for the customer, and not the other way around”.

You kind of know what he means, but just hope the rest of Aon will too.