(Reuters) – Property and casualty insurer Chubb Ltd on Thursday offered to acquire its smaller rival Hartford Financial Services Group Inc in a cash-and-share deal for $ 23.24 billion.
Chubb’s $ 65 per share offering represents a 13.2% premium over Hartford’s last close of $ 57.41.
Hartford said earlier that day that it received a takeover bid from Chubb, but did not disclose financial details of the offer.
Chubb, in its recent statement, said it has yet to receive a response from Hartford to its proposal, adding that even if an agreement is reached, its terms, structure or timing cannot be assured.
A deal between The Hartford and Chubb would be the largest in the industry since Aon Plc’s $ 30 billion acquisition of Willis Towers Watson last year, and the largest in the U.S. general insurance space. Since Chubb was created in its current form in January 2016.
Then ACE Ltd bought Chubb Corp for $ 28.5 billion, and the combined company retained the Chubb brand.
In a note, Wells Fargo analysts called The Hartford’s small business insurance franchise the main draw for Chubb, which is currently focused on covering medium and large businesses. Chubb has about $ 9.4 billion of surplus capital to fund any transaction.
They noted that previous deals in the general insurance space valued companies at more than 1.8 times book value, likely seen as a baseline for trading by The Hartford, which was trading at 1.14 times before the news. from Thursday. A valuation of 1.75 times the price of The Hartford at $ 30 billion.
The coronavirus pandemic is reshaping the insurance industry, and consolidation could help lower costs after substantial losses in 2020.
Chubb CEO Evan Greenberg warned in April last year that the pandemic would likely cause the largest loss in the history of the industry. The insurer posted $ 1.19 billion in pandemic-related losses in 2020.
P&C insurers also faced significant catastrophic losses in 2020 from wildfires in western states and the busiest Atlantic hurricane season on record. Combined with claims associated with civil unrest, these benefits outweighed the benefits of fewer auto claims as people drove less due to the pandemic, Fitch Ratings said in a report Thursday.
Chubb, which reported $ 41 billion in gross written premiums last year, also provides supplemental health and personal accident insurance, as well as life insurance, in 54 countries and territories.
Founded in 1810, The Hartford reported $ 17.3 billion in total premiums last year. The company provides coverage for workers’ compensation, professional management and liability, and other specialized areas, including political risk.
The Hartford sold an insurance policy to baseball hitter Babe Ruth in 1920 for disability protection and also insured the only home that Abraham Lincoln owned.
Chubb has its roots in 1882 when Thomas Caldecot Chubb and his son Percy opened their maritime underwriting business in New York City.
Information from Noor Zainab Hussain, Sohini Podder and Amruta Khandekar in Bengaluru and David French in New York; Additional information from Niket Nishant in Bengaluru; Editing by Shounak Dasgupta, Aditya Soni, David Gregorio and Shinjini Ganguli