Dallas, Texas 07/21/2015 (Financialstrend) – Chubb Corp (NYSE:CB) being acquired for $28.3 billion by ACE Limited (NYSE:ACE) turned out to be the biggest deal ever seen in the insurance industry that resulted in the second-largest listed property and casualty insurer. The merger should be a point of concern to Warren Buffett’s Berkshire and American International Group all of whom are competing for market share in the sector.
How does this merger benefit both Chubb and ACE?
Chubb provides ACE with exposure to the high net-worth market in the insurance of mansions, yachts as well as on the commercial auto insurance. Both companies enjoy superior strengths in production and distribution capabilities expected to spur growth both in developed and developing markets.
ACE CEO, Evan Greenberg, who is to lead the combined company, believes the merger presents a perfect opportunity for creating significant value over a period of time. Chubb Corp (NYSE:CB)’s CEO, Jon Finnegan, on the other hand expects the combined balance sheet to allow the combined company compete on the global landscape as global reach, and differentiating capabilities remain key to success.
Expected Benefits
The acquisitions rank ACE as the 14th largest property and Casualty Company as Chubb Corp (NYSE:CB) comes in 13th in terms of premiums. The combined premium makes the combined company the sixth largest just behind Travelers Companies. The transaction also offers Chubb’s shareholders more premium for shares they currently own as the stock is already up by more than 30%.
The merger should offer more opportunities for growth than if the two companies operated as standalone entities. A strong brand strength should be one of the positive attributes to look out for, which should lead to improved earnings as a result of an increase in revenues. Chubb’s product line is also expected to benefit a great deal from ACE’s global presence that spans over 54 countries.
Cost synergies totaling $650 million should be realized by 2018 expected to have an impact on annual incremental growth.
