CHICAGO (Bloomberg) — Aon Corp., the world’s second-biggest insurance broker, said third-quarter profit fell 13 percent after the company set aside more money to pay for claims in its underwriting business.Net income dropped to $106 million, or 32 cents a share, from $122 million, or 36 cents, a year earlier, the Chicago-based company said in a statement. Revenue rose seven percent to $2.17 billion.

Aon set aside $102 million to pay insurance claims, including $81 million tied to National Program Services, an independent contractor that once worked for Aon’s Virginia Surety Co. The principal of National Program Services was convicted of theft in 2004, Aon said in an Oct. 25 statement.

“There was some alleged fraud and breach of contract, and that’s one of the main reasons the reserves are being set aside,” Aon spokesman Al Orendorff said. The company agreed to sell Virginia Surety in June.

Chief Executive Officer Greg Case has been selling Aon’s property and casualty underwriting units to concentrate on the business of finding corporate customers the best price on insurance.

As Aon prepared to sell or wind down the businesses, the company hired outside analysts to review their liabilities, Orendorff said. When they examined Virginia Surety, “it became apparent that there was a need to increase the reserves for potential claims,” he said.

Aon is facing tougher competition from smaller brokers, which have posted higher growth in revenue this year.

Brokerage revenue at Aon rose three percent in the third quarter, excluding acquisitions and sales, compared with five percent that fourth-ranked Arthur J. Gallagher & Co. posted on the same basis. Seventh-ranked Brown & Brown Inc. gained 5.3 percent.

Marsh & McLennan Cos., the world’s largest broker, had unchanged brokerage revenue on that basis, the company said earlier on Wednesday.

Separately, Aon said changes in its defined-benefit pension plans will save about $60 million annually. The changes affect 11,000 US employees and 1,700 in the UK.