Property and casualty insurer Chubb offered on Thursday to acquire smaller rival Hartford Financial Services Group in a $ 23.24 billion cash-and-stock deal.
Chubb’s offer of $ 65 per share represents a 13.2% premium over Hartford’s last close of $ 57.41.
Hartford said earlier in the day that it had received a takeover offer from Chubb, but did not disclose the financial details of the offer.
Chubb said in its recent statement that it has not yet received a response from Hartford to its proposal, adding that even if a deal is reached, its terms, structure or timing cannot be guaranteed.
A deal between The Hartford and Chubb would be the largest in the industry since Aon’s $ 30 billion acquisition of Willis Towers Watson last year, and the largest in the U.S. non-life insurance industry since Chubb in its current form was founded in January 2016.
Subsequently, ACE bought Chubb for $ 28.5 billion, with the combined company retaining Chubb’s branding.
In a note, analysts from Wells Fargo called The Hartford’s small business franchise the main draw for Chubb, which currently targets medium and large businesses. Chubb has approximately $ 9.4 billion in excess capital to fund a transaction.
They noted that previous deals in the P&C space valued companies at more than 1.8 times book value, likely seen as a basis for negotiation by The Hartford, which traded 1.14 times ahead of Thursday’s news. At a valuation of 1.75 times, The Hartford would cost $ 30 billion.
The coronavirus pandemic is changing the insurance industry and consolidation could help cut costs after significant losses in 2020.
Chubb Chief Executive Officer Evan Greenberg warned in April last year that the pandemic was likely to cause the biggest loss in the industry’s history. The insurer posted $ 1.19 billion in pandemic-related losses in 2020.
P&C insurers also faced significant catastrophe losses from wildfires in western states in 2020 and the most active Atlantic hurricane season on record. Combined with claims linked to civil unrest, these benefits outweighed fewer car claims as people drove less because of the pandemic, Fitch Ratings said in a report on Thursday.
Chubb, which reported $ 41 billion in gross written premiums last year, also offers personal accident and supplemental health 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 employee compensation, management and professional liability, and other specialist areas, including political risk.
The Hartford famously sold baseball slugger Babe Ruth an insurance policy in 1920 for disability protection and also insured the only home Abraham Lincoln ever owned.
Chubb has its origins in 1882 when Thomas Caldecot Chubb and his son Percy opened their marine underwriting business in New York City.