ZURICH-based insurance giant ACE will buy upmarket property insurer Chubb for $28.3bn (£18.1bn) so that it can gain access to higher premium revenue from its wealthy client base, as fierce competition has cut deeply into the industry’s profit margins.
Chubb shares jumped to a record high of $129.31, above the offer price of $124.13, suggesting some investors see potential for a rival bid. ACE shares rose 5.3 per cent on the news.
The takeover, of a record size in the insurance sector, will create the world’s largest property and casualty insurer by underwriting income.
Very low catastrophe insurance premiums, the rise of catastrophe bonds, historically low interest rates and stiff competition have prompted a wave of acquisitions among underwriters.
Potential rival bidders include Allianz, Berkshire Hathaway , AXA and Travelers Cos, Wells Fargo analyst John Hall wrote in a note.
The combined company, which will adopt Chubb's name, will be led by ACE chief executive Evan Greenberg, the son of AIG ex-chief Maurice “Hank” Greenberg.
ACE planned to issue $5.3bn of senior notes to help fund the takeover, it said yesterday.