ACE’s acquisition of Chubb last week marks the largest in the insurance industry to date and is predicted to spark a flurry of transaction activity throughout the sector.
The $28.3 billion acquisition is the biggest ever in the industry, raising the bar and increasing the urgency for other players to buy, according to Citigroup analyst Todd Bault.
“A deal of this scope tells us that something big has changed, and that is the push for growth,” Bault wrote in a research note.
“There is now literally no deal that cannot be contemplated in [property-casualty insurance] at present.”
The magnitude of the deal is predicted to have competing insurers changing tact and reconsidering future actions, according to Noruma insurance analyst Cliff Gallant.
“Major companies need to rethink their global ambitions and consider actions perhaps not previously considered. Small deals are likely irrelevant,” Gallant told the Wall Street Journal’s Money Beat.
The deal follows a relatively modest claims loss period for property-casualty insurers, which has produced capital growth and spurred pressure to compete.
The new company will be led by ACE Chairman and CEO Evan Greenberg, who says that, despite speculation regarding motives, the transaction is a product of strength and opportunity.
“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 says.
“The data and insight we will gain from our respective skills and experience will allow us to do so much more.
“Together, we will grow more substantially and at a faster rate, producing greater earnings, than we could achieve as two separate companies.”
The merged company will take the Chubb name, which has been celebrated by Chubb CEO John Finnegan as a result of Chubb’s strong branding.
“The combined company will adopt the Chubb name – a clear indication of ACE’s respect for the Chubb brand and the attributes and heritage of quality and service it represents,” Finnegan says.
“We are excited about moving forward as a larger, stronger, more global company.”
The deal will result in ACE shareholders owning 70% of the new company, with Chubb shareholders taking 30%.