ACE–Chubb merger changes dynamics
On July 1, 2015, ACE (ACE) announced the acquisition of Chubb (CB) for a combination of cash and shares amounting to $28.3 billion. In this biggest-ever deal for the insurance industry (XLF), ACE has valued Chubb’s outstanding shares at $124.13 per share. ACE, led by Evan Greenberg, made a bid that valued Chubb at a 30% premium to its market value the day before the transaction was announced.
The deal will create the second-largest listed property and casualty insurer, by market capitalization, in the US. In a statement issued by both companies, it’s noted that ACE will own 70% of the company after the transaction closes, and that Greenberg will lead the combined insurer.
ACE Limited is a global insurance and reinsurance company. It offers commercial insurance products and services, such as risk management programs, loss control and engineering, and complex claims management. The company operates under five segments:
- Insurance – North American P&C (property and casualty)
- Insurance – North American Agriculture
- Insurance – Overseas General
- Global Reinsurance
It reported total revenues of $19 billion in 2014, with net income of $2.85 billion. ACE provides specialized insurance products to niche areas such as aviation and energy. The company also offers personal lines of insurance coverage:
- umbrella liability
- recreational marine
The Chubb Corporation is a holding company whose subsidiaries are principally in the property and casualty insurance business. It reported total revenues of $3.47 billion in 2014, with net income of $375 million.
The company’s property and casualty insurance subsidiaries underwrite insurance in the United States, Canada, Europe, Australia, and parts of Latin America and Asia. The P&C Group operates through three business units:
- Chubb Personal Insurance – personal insurance products for homes and valuable articles for high net worth individuals
- Chubb Commercial Insurance – multiple peril, primary liability, excess and umbrella liability, automobile, workers’ compensation, property, and marine insurance
- Chubb Specialty Insurance – specialized professional liability products for privately held and publicly traded companies, financial institutions, professional firms, healthcare, and not-for-profit organizations
These are two other major transactions in the insurance sector:
- AIG (AIG) acquired American General in 2001 for a transaction value of $22.7 billion
- Berkshire Hathaway (BRK-B) acquired General Re in 1998 for a transaction value of $16.2 billion