ACE Ltd. announced it would pay US$28.3 billion in cash and stock to acquire its rival,
Chubb Corp., in the largest-ever acquisition between two companies in the insurance industry.
ACE shareholders will now own 70% of the new company, which will operate under the Chubb name and be led by ACE Chief Executive Evan Greenberg. Chubb CEO John Finnegan will serve as executive vice chairman for external affairs of North America and oversee integration of the two companies.
Four independent directors from Chubb’s board will also be added to the board of the new, combined company.
“Together, ACE and Chubb will create a global leader in commercial and personal property and casualty (P&C) insurance, with enhanced growth and earning power and an exceptional balance of products as a result of greater diversification and a product mix with reduced exposure to the P&C industry pricing cycle,” ACE said in a statement.
The deal comes as property/casualty insurance companies face downward pricing pressures from a softening market and diminished interest income on investments.
Already, 2015 is on track to be the busiest year for mergers and acquisition in the insurance industry, and insurers have spent more than US$2 trillion on global M&A deals.
“We are thrilled to announce the acquisition of Chubb, a venerable company with a great brand,” said 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,” he continued.
With Chubb, ACE will expand its high-net worth client base in the personal lines business through Chubb’s Masterpiece homeowners brand. ACE will also have access to Chubb’s large middle-market commercial lines business.
“We have complementary product strengths – where one of us is not present, the other is,” Greenberg continued.
“Where one of us is strong, the other is even stronger. Where there is overlap in product, generally one of us is more present at the large end of the corporate market while the other is serving the smaller or mid-market segment.
"The data and insight we will gain from our respective skills and experience will allow us to do so much more. For example, 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, and our combined strengths will enable us to pursue the small and micro markets globally.”
The acquisition is expected to be completed during the first quarter of 2016.
