In a major transaction, ACE Limited has agreed to acquire The Chubb Corp. for $28.3 billion in cash and stock.
The balance sheet’s size and strength will elevate the combined company into the elite group of global P/C insurers. As of Dec. 31, 2014, on an aggregate basis, the combined company had total shareholders’ equity of nearly $46 billion and cash, investments and other assets of $150 billion.
The combined company will use the Chubb name.
The boards of directors of both companies have approved the deal.
Together, ACE and Chubb believe they will create a global leader in commercial and personal property/casualty insurance, with a balance of products and a product mix with reduced exposure to the P/C industry pricing cycle.
They also said the combination will create efficiencies that will allow for investment in people, technology, products and distribution.
‘Compelling’ Deal Happened Quickly
“We are thrilled to announce the acquisition of Chubb, a venerable company with a great brand,” said Evan G. Greenberg, chairman and CEO of ACE Limited. “This transaction advances our strategy in a meaningful way and represents an outstanding opportunity to create significant value over a reasonable period of time for both ACE and Chubb shareholders. We are combining two great underwriting companies that are highly complementary. We will make each other better and create a unique company in a class of its own that has greater growth and earning power than the sum of the two companies separately.”
Greenberg said on July 1 that ACE approached Chubb “only a few weeks ago” and the “deal came together rapidly.”
John D. Finnegan, chairman, president and CEO of Chubb, called the deal a “compelling transaction” for all Chubb and ACE stakeholders. “The combination brings together two highly respected and successful companies with complementary capabilities, assets and geographic footprints.”
Finnegan said Chubb “was not shopping” the company but the deal ACE brought it “made a lot of sense” after discussion.
The combined company will be led by Greenberg as chairman and CEO. Finnegan has agreed to serve as executive vice chairman for External Affairs of North America and will assist with integration. The company’s board will be expanded from 14 directors to 18 directors with the addition of four independent directors from Chubb’s current board.
Finnegan, who joined Chubb in 2002 from General Motors Corp. to be chairman, president and CEO, was slated to remain in his current roles until the end of 2016. In 2013, the board decided to keep him on for three more years.
Name and Locations
Chubb will continue to operate under its name while the combined company transitions to operate under the Chubb name globally. The combined company will remain a Swiss company with principal offices in Zurich.
The announcement said Chubb’s headquarters in Warren, N.J., will house a “substantial portion” of the headquarters function for the combined company’s North American Division and ACE will continue to maintain a significant presence in Philadelphia, where its current North American division headquarters is based.
Markets and Products
In the United States commercial lines business, ACE serves industrial commercial, multinational and upper middle market companies with distribution substantially through a major brokerage presence. Chubb is primarily a middle-market commercial, specialty and surety insurer with a broad product portfolio and a major agency presence.
In personal insurance, Chubb is a leading provider of personal lines coverage to high net worth customers in the U.S. while ACE has been increasingly focused on these customers as well. Last December, ACE upped its stake in the high net worth personal lines market with its purchase of the business of Fireman’s Fund to go along with its existing ACE Private Risk Services. In 2007, ACE bought the high net worth accounts of Atlantic Mutual.
Outside the U.S., ACE is a commercial insurer with a presence in 54 countries. Chubb has operations in 25 countries. ACE has a leading market position in global accident and health (A&H) and both companies offer complementary personal lines offerings in Canada, Europe, Asia and Latin America. Both companies offer professional lines globally, with ACE targeting upper and upper middle market and Chubb specializing in the middle and upper middle market.
Data and Culture
Regarding the Chubb acquisition, Greenberg said the data and insight the two will gain from their respective skills and experience will allow them to do more. For example, he said, Chubb will enhance ACE’s ability to serve the upper middle market, while ACE will provide more products to serve Chubb’s middle market clients. Their combined strengths will enable them to pursue the small and micro markets globally.
The transaction is expected to close during the first quarter of 2016, subject to approval by ACE and Chubb shareholders and regulatory approvals.
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