UPDATE 3-Aon organic brokerage revenue slips; shares fall

* Organic brokerage revenue declines 3 pct

* Total revenue down 2 pct; expenses flat

* Future growth could come from acquisitions

* Shares fall nearly 6 percent (Recasts; adds analyst comment, CEO and CFO comments, byline; updates share move)

NEW YORK, Oct 30 - Aon Corp, the world's largest insurance brokerage, said its brokerage unit's organic revenue growth declined for the first time in 16 quarters, sending its shares down nearly 6 percent.

The news overshadowed Aon's report of slightly higher third-quarter profit, with operating earnings about in line with expectations.

"The key takeaway in the quarter was disappointing revenue" for the brokerage unit, Citigroup analyst Keith Walsh wrote in a research note.

Walsh said while insurance brokers have been plagued recently by declining revenue, he had expected Aon to buck the trend. He said the drop-off in revenue from reinsurance brokerage and in the Americas had been especially disappointing.

Organic revenue growth is a key industry measure that assesses growth before acquisitions, divestitures and foreign currency translation.

Aon shares fell $2.33, or 5.7 percent, to $38.86 in midday trade on the New York Stock Exchange.

Chicago-based Aon, which competes with Marsh & McLennan Cos Inc in helping businesses find insurance, has been working to streamline its business to boost savings since 2005, when an industrywide probe led big brokerages to drop contingent commissions -- a lucrative practice whereby insurers compensated their brokers for business.

But the company will need more than savings to buffer it from the effects of rising unemployment and contraction in spending, which has shrunk demand for insurance coverage.

Chief Executive Greg Case, in a telephone interview after the release of the earnings report, said Aon was taking steps to ensure it emerged in good shape from the financial crisis.

"We have a number of things we are going to do to expand the business, especially in certain parts of the world" where demand is stronger, he said.

Growth could also be achieved through increasing acquisitions. "There are opportunities to acquire companies that we may not otherwise be able to," said Chief Financial Officer Christa Davies, in a nod to lower valuations amid the credit crisis.

Last year, Aon paid about $1.35 billion to acquire London-based reinsurance broker Benfield Group Ltd, helping to clinch the No. 1 spot in insurance brokerage, ahead of Marsh & McLennan, which had long been its bigger rival.

Aon also continues to tighten its belt. It raised its forecast for annualized savings from a 2007 restructuring initiative by $97 million to $467 million. But the cost of achieving those savings has risen by $150 million to $700 million, it said.

In the third quarter, expenses were flat at $1.6 billion, and total revenue fell 2 percent to $1.8 billion.

Overall, an accounting gain of $3 million related to divestitures helped Aon post a slightly higher quarterly profit of $120 million, up from $117 million a year earlier.

Income from continuing operations, excluding one-time items, fell to 65 cents a share from 69 cents. Analysts on average had expected 66 cents, according to Thomson Reuters I/B/E/S.