ACE Ltd. announced today it would pay $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.
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 $2 trillion on global M&A deals.
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.
The insurer expects to gain annual expense savings of about $650 million pretax as a result of acquiring Chubb.
“This is a landmark deal that puts two awfully good companies ogether and forms a global powerhouse with deep and defensible US market penetration,” credit analyst David Havens of Imperial Capital LLC told the
Wall Street Journal.
The news is rather unexpected, Finnegan said on a conference call, as he did not market Chubb for acquisition and the deal came together in the past few weeks.
The acquisition is expected to be completed during the first quarter of 2016.
